UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
FOR THE FISCAL YEAR ENDED December 31, 20182021
or
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Commission file number 1-6714001-06714
Graham Holdings Company
(Exact name of registrant as specified in its charter)
Delaware53-0182885
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
1300 North 17th Street, Arlington, Virginia22209
(Address of principal executive offices)(Zip Code)
Registrant’s Telephone Number, Including Area Code: (703) 345-6300
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class B Common Stock, par value

$1.00 per share
 GHCNew York Stock Exchange
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý  No ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨  No ý
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý  No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý  No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated
filer
Accelerated Filer
ý
Accelerated

filer
¨
Non-accelerated

filer
¨
Smaller reporting

company
¨
Emerging growth

company
¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes No 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨  No ý
Aggregate market value of the registrant’s common equity held by non-affiliates on June 29, 2018,30, 2021, based on the closing price for the Company’s Class B Common Stock on the New York Stock Exchange on such date: approximately $2,500,000,000.
Shares of common stock outstanding at February 20, 2019:18, 2022:
Class A Common Stock –  964,001 shares
Class B Common Stock –  4,353,6233,939,977 shares
Documents partially incorporated by reference:
Definitive Proxy Statement for the registrant’s 20192022 Annual Meeting of Stockholders
(incorporated in Part III to the extent provided in Items 10, 11, 12, 13 and 14 hereof).





GRAHAM HOLDINGS COMPANY 20182021 FORM 10-K
 
Item 1.Business
 Education
 Television Broadcasting
Manufacturing
Healthcare
Automotive
 Other Activities
 Competition
Executive Officers
EmployeesHuman Capital
Forward-Looking Statements
Available Information
Item 1A.Risk Factors
Item 1B.

Unresolved Staff Comments
Item 2.Properties
Item 3.Legal Proceedings
Item 4.Mine Safety Disclosures
Item 5.Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6.Selected Financial DataReserved
Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A.Quantitative and Qualitative Disclosures About Market Risk
Item 8.Financial Statements and Supplementary Data
Item 9.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Item 9A.Controls and Procedures
Item 9B.Other Information
Item 9C.Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Item 10.Directors, Executive Officers and Corporate Governance
Item 11.Executive Compensation
Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13.Certain Relationships and Related Transactions and Director Independence
Item 14.Principal Accounting Fees and Services
Item 15.Exhibits, Financial Statement Schedules
Item 16.Form 10-K Summary
INDEX TO EXHIBITS
SIGNATURES
INDEX TO FINANCIAL INFORMATION
Management’s Discussion and Analysis of Results of Operations and Financial Condition (Unaudited)
Financial Statements: 
Report of Independent Registered Public Accounting Firm
Consolidated Statements of Operations for the Three Years Ended December 31, 20182021
Consolidated Statements of Comprehensive Income (Loss) for the Three Years Ended December 31, 20182021
Consolidated Balance Sheets at December 31, 20182021 and 20172020
Consolidated Statements of Cash Flows for the Three Years Ended December 31, 20182021
Consolidated Statements of Changes in Common Stockholders’ Equity for the Three Years Ended December 31, 20182021
Notes to Consolidated Financial Statements
Five-Year Summary of Selected Historical Financial Data (Unaudited)





PART I
Item 1. Business.
Graham Holdings Company (the Company) is a diversified education and media company whose operations include educational services; television broadcasting; online, podcast, print and local TV news; manufacturing; home health and hospice care; and manufacturing.automotive dealerships. The Company’s Kaplan, Inc. (Kaplan) subsidiary provides a wide variety of educational services, both domestically and outside the United States.States (U.S.). The Company’s media operations comprise the ownership and operation of television broadcasting (through the ownership and operation of seven television broadcast stations), plus Slate and Foreign Policy magazines; Panoply,City Cast, a daily local news podcast technology and advertisingnewsletter company; and Pinna, an ad-free audio streaming service for children. The Company also ownsCompany’s manufacturing companies comprise the ownership of a supplier of pressure treated wood, an electrical solutions company, a manufacturer of lifting solutions, and a supplier of certain parts used in electric utilities and industrial systems. The Company’s home health and hospice providers,operations provide home health, hospice and palliative services. The Company’s automotive business comprise four industrial companies, two automotive dealerships and Social Code LLC,dealerships. The Company also owns restaurants, a custom framing company, a cybersecurity training company, a marketing solutions provider.provider, a customer data and analytics software company, and a consumer internet company that builds creator-driven brands in lifestyle, home and art design categories.
Financial information concerning the principal segments of the Company’s business for the past three fiscal years is contained in Note 19 to the Company’s Consolidated Financial Statements appearing elsewhere in this Annual Report on Form 10-K. Revenues for each segment are shown in Note 19 gross of intersegment sales. Consolidated revenues are reported net of intersegment sales, which did not exceed 0.1% of consolidated operating revenues.
The Company’s operations in geographic areas outside the U.S. consist primarily of Kaplan’s non-U.S. operations. During each of the fiscal years 2018, 20172021, 2020 and 2016,2019, these operations accounted for approximately 24%22%, 25%22% and 25%24%, respectively, of the Company’s consolidated revenues, and the identifiable assets attributable to non-U.S. operations represented approximately 23%19% and 21% of the Company’s consolidated assets at December 31, 20182021 and 2017,2020, respectively.
EducationEDUCATION
Kaplan, a subsidiary of the Company, provides an extensive range of education and related services worldwide for students and professionals. In 2021, Kaplan served approximately 700,000 students and professionals worldwide and had associations with approximately 12,300 companies and commercial relationships with approximately 4,000 universities, colleges, schools and school districts across the globe. Kaplan conducts its operations through fourthree segments: Kaplan International,North America Higher Education, Kaplan North America Supplemental Education and Kaplan International. As more fully described below, Kaplan consolidated its former Kaplan Higher Education, Kaplan Test Preparation and Kaplan Professional (U.S.).segments into one business, Kaplan North America, operating through two segments, Higher Education and Supplemental Education. In addition, the results of the Kaplan Corporate segment include results of Kaplan’s investment activities in education technology companies.
The following table presents revenues for each of Kaplan’s segments:
Year Ended December 31Year Ended December 31
(in thousands)2018 2017 2016(in thousands)202120202019
Kaplan International$719,982
 $697,999
 $696,362
Kaplan International$726,875 $653,892 $750,245 
Kaplan Higher Education342,085
 431,425
 501,784
Kaplan Test Preparation256,102
 273,298
 286,556
Kaplan Professional (U.S.)134,187
 115,839
 115,263
Kaplan North America Higher EducationKaplan North America Higher Education317,854 316,095 305,672 
Kaplan North America Supplemental EducationKaplan North America Supplemental Education309,069 327,087 388,814 
Kaplan Corporate and Intersegment Eliminations(1,341) (1,785) (1,504)Kaplan Corporate and Intersegment Eliminations7,447 8,639 7,019 
Total Kaplan Revenue$1,451,015
 $1,516,776
 $1,598,461
Total Kaplan Revenue$1,361,245 $1,305,713 $1,451,750 
In 2020, Kaplan combined its three segments based in the United States (Kaplan Higher Education, Kaplan Test Preparation and Kaplan Professional) into one business known as Kaplan North America. The combination reinforces Kaplan’s interconnected products and services, increases competitiveness in Kaplan’s markets and drives efficiencies.
Kaplan International
Kaplan International (KI) operates businesses in Europe and the U.S.Middle East, North America and the Asia Pacific region. Eachregion, each of these businesseswhich is discussed below.
Europe.Europe and the Middle East. In Europe, KI operates the following businesses, all of which are based in the U.K.United Kingdom (U.K.) and Ireland: Kaplan UK, KI Pathways, KI English,Kaplan Languages Group, Mander Portman Woodward,
1


Dublin Business School, and Kaplan Open Learning.Learning and BridgeU. In the Middle East, Kaplan Middle East is based in the United Arab Emirates.
The Kaplan UK business in Europe, through Kaplan Financial Limited, is a provider of apprenticeship training and test preparation services and degrees for accounting and financial services professionals, including those studying for ACCA, CIMA and ICAEW qualifications. In addition, Kaplan UK provides professional training. In 2018,2021, Kaplan UK provided courses to over 50,00047,000 students in accountancy and financial services. In addition, Kaplan UK has been the sole authorized assessment provider for the Solicitors Regulation Authority of assessments under The Qualified Lawyers Transfer Scheme for candidates seeking to become solicitors of England and Wales who are already qualified lawyers in certain recognized jurisdictions. In 2021 Kaplan UK became the sole authorized assessment provider for the Solicitors Qualifying Examination for all candidates seeking to become a solicitor in England and Wales. Kaplan UK is headquartered in London, England, and has 2119 training centers located throughout the U.K.
The KI Pathways business offers academic preparation programs especially designed for international students who wish to study for degrees from universities in English-speaking countries. In 2018,2021, university preparation programs were delivered in Australia, China, Japan, Myanmar, Singapore the U.K. and the U.S., serving approximately 12,000 students in partnership with more than 40 universities.U.K.
The KI EnglishKaplan Languages Group business provides English-language training, academic preparation programs and test preparation for English–English proficiency exams, principally for students wishing to study and travel in English-speaking countries. KI English operates a totalAs of 37December 31, 2021, the Kaplan Languages Group operated 19 English-language schools, with 1912 located in the U.K., Ireland Australia, New


Zealand and Canada and 18seven located in the U.S. In 2018, KI English2021, the Kaplan Languages Group served approximately 36,00010,300 students for in-class and online English-language instruction. Through the Alpadia language schools located in France, Germany and Switzerland, Kaplan Languages Group also offers adolescents (from 16+) and adults, French and German language training. Alpadia also operates language camps for juniors (from 8+) and teens during the fall, spring and summer seasons in the U.K., France, Germany and Switzerland.
Mander Portman Woodward (MPW) is a U.K. independent sixth-form college that prepares domestic and international students for A-level examinations that controlare required for admission to U.K. universities. MPW operates three colleges, in London, Cambridge and Birmingham.
KI also operates Dublin Business School in Ireland, a higher education institution, and Kaplan Open Learning in the U.K., an online learning institution. At the end of 2018,2021, these institutions enrolled an aggregate of approximately 6,00010,400 students.
In 2021, Kaplan Middle East, a financial training business operating in Dubai, United Arab Emirates and Saudi Arabia, taught approximately 3,900 students.
U.K. Immigration Regulations.Certain KI businesses serve a significant number of international students; therefore, the ability to sponsor international students from outside the European Economic Area (EEA) and Switzerland to come to the U.K. is critical to these businesses. Pursuant to regulations administered by the United Kingdom Visas and Immigration Department (UKVI), the KI Pathways business is required to hold or operate Tier 4Student Route sponsorship licenses for international students to be permitted to enter the U.K. to study the courses that KI Pathways delivers. TwoOne of the KI EnglishKaplan Languages Group schools also have Tier 4 licenseshas a Student Route license to enable themit to teach international students, although students studying the English language mayat these schools generally choose to enter the U.K. on a short-term studyVisitor or Short Term Student visa as opposed to a Tier 4Student Route visa.
Each Tier 4Student Route license holder is required to have passed the annual Basic Compliance Assessment (BCA) and hold Educational Oversight accreditation. Without these criteria being met, KI’s U.K. schools would not be permitted to issue a Confirmation of Acceptance for Studies to potential incoming international students, which is a prerequisite to a student obtaining a Tier 4 student visa. The UKVI rules also require all private institutions to obtain Educational Oversight accreditation, which requires a current and satisfactory full inspection,risk assessment, audit or review by the appropriate academic standards body. For the seventhtenth consecutive year, all KI hasinstitutions have retained 100% in Tier 4 Educational Oversight accreditation, with high grades across all colleges, and all Tier 4 licenseStudent Route annual BCA renewals have been approved again with high scores in the core measurable requirements. KI EnglishKaplan Languages Group has twoone U.K. English-language schoolsschool listed on the Kaplan Tier 4Student master license. The MPW schools each hold current Tier 4Student and Child Student Route licenses and have performed well consistently, well with good records in their Office for Standards in Education, Children’s Services and Skills (OFSTED) and Independent Schools Inspectorate (ISI) Educational Oversight inspections.
The Higher Education and Research Act 2017 (HERA) received Royal Assent on April 27, 2017. HERA undertook a significant reform ofsignificantly reformed the regulation of the higher education sector in the U.K., including the formation of a new regulator for England, the Office for Students (OfS). The 2018–2019 academic year is a transition year under the new regulatory framework. The OfS has published regulatory guidance, including the new Regulatory Framework for Higher Education in England. All of KI’s higher education businesses in the U.K. will need to successfully complete registration with the OfS in 2019 to ensure that they continue operating and retain their Tier 4 sponsor licenses or continue to receive government student loan funding.Students enrolled at Pathways institutions registered with the OfS will be, forare, subject to the first time, recognized as Higher Education Providers, with students of approved providers havinginstitution meeting certain compliance requirements, given many of the same Tier 4student privileges as students of universities in the U.K. effective August 1, 2019. No assurance can be given that each KI business required to registerAll of KI’s other higher education businesses in the U.K., excluding Glasgow International College and University of York International Pathway College, retained registration with the OfS will be successful in doing so. Failure2021 to register with the OfS would result in the loss of a Tier 4 licenseensure that they could continue operating and where relevant, inabilityretain their Student Route sponsor licenses and/or continue to accept students funded by U.K. domestic student loans. Failure of one or more institutions to successfully register withGlasgow International College, which is located in Scotland, is not regulated by the OfS would have a material adverse effect on Kaplan Europe’s operating results.and remains overseen by the Quality Assurance Agency for Higher Education (QAA). The University of York International
Changes continue to be made to U.K. immigration rules. The introduction
2


Pathway College forms part of revised immigration rules has historically increased, and may continue to increase, KI’s operating costs in the U.K.
University of York’s OfS registration. No assurance can be given that each KI business in the U.K. will be able to maintain its Tier 4 BCA statusStudent Route or Child Student route license and Educational Oversight/OfS accreditationOversight or OfS/QAA registration. Maintenance of each of these approvals requires compliance with several core metrics that may be difficult to attain. Losssustain. The loss by one or more institutions of either Tier 4 BCA statusthe Student Route or Child Student route license or Educational Oversight/OfS accreditationOversight or OfS/QAA registration would have a material adverse effect on KI Europe’s operating results.
Impact of Brexit. On June 23, 2016, the U.K. held a referendum in which voters approved a proposal that the U.K. leave the European Union (EU), commonly referred to as “Brexit.” The U.K.’s withdrawal became effective on December 31, 2020. The impact of Brexit on KI over time will depend in part, on the outcomelong-term effects of future negotiations regarding the terms of the U.K.’s withdrawal from the EU, possibly including any transition period or the outcome of any “no deal” exit. A “no deal” exit would occur if the U.K. government is not able to reach agreement with the EU on either transition arrangements or its future relationship with the EU upon exit. This risk increased following the rejection of the proposed transition arrangements by the U.K. Parliament on January 15, 2019. A U.K. exit on a “no deal” basis could adversely impact the value of the British pound as compared to other currencies or potentially have other adverse consequences and may have a materially adverse impact on KI’s results of operations. Uncertainty over the outcome of the negotiations and the possibility of a “no deal” exit may materially or significantly diminish interest in traveling to the U.K. for study.EU. If the U.K. is no longer viewed as a favorable study destination, KI’s ability to recruit international students will be adversely impacted,


which would result in material adverse impacts tomaterially adversely affect KI’s results of operations and cash flows. TheIn November 2021, the EU granted the U.K. government’s Immigration White Paper, issuedan adequacy decision under the General Data Protection Regulation (GDPR) for an initial period of four years.
Revised U.K. immigration rules became effective on January 1, 2021, as the Brexit transition was completed. All international students, including EEA and Swiss students studying in December 2018, clarified that EU nationals’ ability to enter the U.K. for long-more than six months, are required to obtain a Student Route visa unless they are undertaking an English language course in which case they can apply for a Visit Visa for up to six months or short-term study will change. EU nationala Short Term Study visa of up to 11 months. Free movement ceased between the EEA (together with Switzerland) and the U.K.; students seeking to study higher education courses will be broadlyfrom these countries entering the U.K. are now subject to similarthe same U.K. immigration rules as those that presently apply to non-EU international students (KI Pathways). EU national students seeking to study English-language courses will either require an Electronic Travel Authorization or a short-term student visa (KI English). EU nationals do not currently require visas or face other administrative barriers to study in the U.K. It is also expected that recruitment of staff from outside the U.K will become more difficultEEA and that Kaplan may experience difficultiesSwitzerland. EEA and Swiss nationals commencing a higher education course in attracting and retaining international staff in the U.K.England from August 2021 no longer qualify for home fee status or have access to financial support from Student Finance England. It is unclear how international student recruitment agents and prospective international students will view the U.K. as a study destination after the introduction of theseany new immigration requirements, the EU exit negotiations and the U.K.’s eventual exit from the EU. The introduction of revised immigration rules has historically increased, and may continue to increase, KI’s operating costs in the U.K. The introduction of new visa and other administrative requirements for entry into the U.K., Brexit and the perception of the U.K. as a less favorable study destination may have a materially adverse impact on KI’s ability to recruit international students and KI’s results of operations and cash flows. Additionally, if the U.K. does not receive a determination of adequacy under the EU General Data Protection Regulation, then flows of personal data within KI or between KI and its clients, suppliers, business partners and affiliates may be substantially disrupted. The risks associated with Brexit may be mitigated, in part, by the possibility that a reduction in the value of the British pound against other international currencies may attract greater numbers of students to the U.K.
Asia Pacific.In the Asia Pacific region, Kaplan operates businesses primarily in Singapore, Australia, New Zealand and the People’s Republic of China, including the Hong Kong and China.Special Administrative Region (Hong Kong).
In Singapore, Kaplan operates threetwo business units: Kaplan Higher Education and KHEA-Genesis (which comprises the former Kaplan Financial and Kaplan Professional.Professional business units). During 2018,2021, the Kaplan Higher Education and FinancialKHEA-Genesis (Financial) divisions served more than 14,0009,100 students from Singapore and 2,700approximately 3,400 students from other countries throughout Asia and Western Europe. Kaplan ProfessionalKHEA-Genesis (Professional) provided short courses to approximately 55,000400 professionals, managers, executives and businesspeople in 2018.2021.
Kaplan Singapore’s Higher Education business provides students with the opportunity to earn Bachelor’sbachelor’s and postgraduate degrees in various fields on either a part-time or full-time basis. Kaplan Singapore’s students receive degrees from affiliated educational institutions in Australia, Ireland and the U.K. In addition, this division offers pre-university and diploma programs.
Kaplan Singapore’s FinancialKHEA-Genesis (Financial) business provides preparatory courses for professional qualifications in accountancy and finance, such as the Association of Chartered Certified Accountants (ACCA) and the Chartered Financial Analyst (CFA). Kaplan Singapore’s Professional business, which isthrough Kaplan Learning Institute, an authorized SkillsFuture Singapore (SSG) Approved Training Organization provides(ATO), provided professionals with various skills training through workforce skills qualifications (WSQ) courses. Kaplan Learning Institute ceased offering such courses to help them rejoin the workforce, shift to new careers or catch up with changes that occur in the workplace.
In November 2018,and voluntarily deregistered Kaplan Singapore Professional receivedLearning Institute as a private education institution on March 9, 2020, following a notice in June 2019 from SkillsFuture Singapore (SSG), a statutory board under the Singapore Ministry of Education, that SSG would terminatesuspending Kaplan Singapore Professional’s rightWSQ ATO status and revoking accreditation and funding for all WSQ courses effective July 1, 2019. These actions have adversely affected and will continue to adversely affect Kaplan Singapore’s revenues and operating results.
On October 7, 2020, Kaplan Higher Education Academy (KHEA) was granted approval by SSG to deliver workforce skills qualifications (WSQ)WSQ courses underas an ATO for a period of two years. KHEA-Genesis (Professional) started offering WSQ courses in the Leadership & People Management frameworksecond quarter of 2021.
In June 2021, the Committee for six months from December 1, 2018,Private Education (CPE) in Singapore instructed Kaplan Singapore to cease new enrollments for three marketing diploma programs on both a full and part-time basis due to issues relatingnoncompliance with minimum entry level requirements for admission and to teach out existing students in these programs. On August 23, 2021, the CPE issued the same instructions with respect to the Kaplan Foundation diploma and four information technology diploma programs on both a full and part-time basis. In November 2021, the CPE issued the same instructions with respect to a small number of contractors, and restrictfurther 23 full-time or part-time diploma programs. Post regulatory action, Kaplan Singapore is currently still able to offer 449 programs that are registered with the CPE, out of which there are 16 diplomas, 361 bachelors and the balance of which are certificate and postgraduate courses. Kaplan Singapore will
3


apply for re-registration of diploma programs in 2022. The impact from applying to teach any new WSQ programsregulatory actions by the CPE will have a significant adverse impact on Kaplan Singapore’s revenues, operating results and cash flows in the future. No assurance can be given that applications for six months from the datere-registration of the notice.impacted programs will be successful. An inability to re-register one or more impacted programs could have a further material adverse effect on Kaplan Singapore Professional has accepted the decision from SSGSingapore’s revenues, operating results and enhanced its compliance controls for all other frameworks of WSQ courses.cash flows.
In Australia, Kaplan delivers a broad range of financial services programs from certificate level through Master’smaster’s level, together with professional development offerings through Kaplan Professional, as well as higher education programs in business, accounting, business analytics, hospitality, and tourism and management through Kaplan Business School. In 2018,2021, these businesses provided courses to approximately 2,3004,500 students through face-to-face and online or hybrid classroom programs (within Kaplan Business School) and approximately 43,00030,000 students through online or distance-learning programs offered by Kaplan Professional. In 2021, Kaplan Professional also had approximately 34,000 subscribers for Ontrack, its continuing professional development platform for financial services professionals.
Kaplan Australia’s English-language business, is part of KI English, which operates across five locations in Australia and one location in New Zealand, teaching more than 6,000taught approximately 300 students in 2018.2021. In 2018,July 2021, after the KIlast student completed their course, the New Zealand English Schoollanguage business suspended its operations indefinitely. During 2021, due to the ongoing border closure, the Australian English businesses faced significant falls in Manly was soldstudent numbers leading to allow Kaplana consolidation of the four schools into one, with just the Sydney school offering online classes to refocus its English-language training businesses on metropolitan areas in Australia.a small number of remaining students. The Kaplan Australia Pathways business is also part of KI Pathways. It consistsIn 2021, it consisted of Murdoch Institute of Technology, the University of Newcastle College of International Education and the University of Adelaide College, (formerly Bradford College) and offered face-to-face pathways and foundational education in 2021 to more than 1,300approximately 1,000 students wishing to enter Murdoch University, in Perththe University of Newcastle and the University of Adelaide, respectively, in 2018.Adelaide. The contract with Murdoch University to run the Murdoch Institute of Technology will expireexpired in 2020,June 2021. In January 2021, Kaplan Australia launched the University of Newcastle College of International Education, as part of a seven-year collaboration with the University of Newcastle. In March 2021, the University of Adelaide College commenced delivery of teaching. In October 2021, Kaplan International New Zealand obtained approval to establish a new pathways college, Massey University College, which is scheduled to begin diploma and Kaplan has decided not to exercise its right to negotiate an extension of its contract.
graduate diploma courses in July and October 2022, respectively. Kaplan Australia also owns Red Marker Pty Ltd., a machine learning and artificial intelligence-based provider of regulatory software. Itslegal risk detection for digital, advertising and marketing content. Red Marker supports a wide variety of industries, including financial services, telecoms, automotive, pharmaceutical, food and beverage, media and government bodies. Red Marker’s Artemis product detects potentially non-compliantnoncompliant content as it is being created, helping


advisers and licensees to identify and remediate compliance risks associated with the promotion of financial products or services.risks.
In Hong Kong, Kaplan operates three main business units: Kaplan Financial, Kaplan Language Training and Kaplan Higher Education, serving approximately 13,00010,600 students annually.
Kaplan Hong Kong’s Financial division delivers preparatory courses to approximately 11,0008,900 students and business executives wishing to earn professional qualifications in accountancy, financial markets designations and other professional courses.fields.
Hong Kong’s Language Training division offers both test preparation for both overseas study and college applications, including TOEFL, IELTS, SAT and GMAT, to approximately 1,000500 students.
Kaplan Hong Kong’s Higher Education division offers both full-time and part-time programs to approximately 1,0001,200 students studying for degrees from leading Western universities. Students earn Doctorate, Master’sdoctorate, master’s and Bachelor’sbachelor’s degrees in Hong Kong. Kaplan also offers a proprietary pre-college diploma program through the Kaplan Business and Accountancy School.
In 2014, Kaplan Holdings Limited (Hong Kong) signed a joint venture agreement with CITIC Press Corporation. Under the terms of the agreement, the parties have incorporated a joint venture company, Kaplan CITIC Education Co. Limited, 49% of which is 49% owned by Kaplan Holdings Limited. The joint venture company is carrying out publishing and distribution of Kaplan Financial training products in China (including CFA, FRM and ACCA) and is expanding its business with other Kaplan divisions under an intellectual property license from Kaplan.the People’s Republic of China.
Each of Kaplan’s international businesses is subject to unique and often complex regulatory environments in the countries in which they operate. Theoperate, and the degree of consistency in the application and interpretation of such regulations can vary significantly in certain jurisdictions, which can make compliance challenging. No assurance can be given that Kaplan will successfully comply with all applicable foreign regulations, and failure to do so could materially and adversely affect Kaplans operating results.jurisdictions.
Kaplan North America
As previously discussed, in 2020 Kaplan combined its segments into one business named Kaplan North America (KNA), comprised of two segments, Kaplan North America Higher Education (comprising primarily former Kaplan Higher Education (KHE) products and services) and Kaplan North America Supplemental Education (comprising primarily former Kaplan Test Preparation (KTP) and former Kaplan Professional (KP) products and services).
4


Kaplan North America Higher Education
Until March 22, 2018, through the KHE segment, Kaplan Higher Education (KHE) provided postsecondary education services to students through Kaplan University’s (KU) online and fixed-facility colleges. KU provided a wide array of certificate, diploma and degree programs designed to meet the needs of students seeking to advance their education and career goals.
On March 22, 2018, certain subsidiaries of Kaplan contributed the institutional assets and operations of KU to a new university: an Indiana non-profit,nonprofit, public-benefit corporation affiliated with Purdue University, known as Purdue University Global (Purdue Global). As part of the transfer to Purdue Global, KU transferred students, academic personnel, faculty and operations, property leases for KU’s campuses and learning centers, and KHE-ownedKaplan-owned academic curricula and content related to KU courses. Kaplan also indemnified Purdue for certain pre-closing liabilities. At the same time, KU and Purdue Global entered into a Transition and Operations Support Agreement, which was amended on July 29, 2019 (TOSA), pursuant to which KHEKNA provides key non-academic operations support to Purdue Global. Kaplan received nominal upfront cash consideration upon the transfer of the institutional assets and operations of KU. The combination of the KHE, KTP and KP segments into one KNA business did not change Kaplan’s or Purdue Global’s obligations under the TOSA.
The transfer of KU did not include any of the assets of the KU School of Professional and Continuing Education (now managed by KNA), which provides professional training and exam preparation for professional certifications and licensures, norlicensures. The transfer also did itnot include the transfer of other Kaplan businesses.
KHE’s Third-Party Service Operations
KHE’s primary business operations are providingKNA also provides non-academic operations support services for online pre-college, certificate, undergraduate and graduate programs to Purdue Global pursuant to the TOSA and similar services toinstitutions such as Purdue University, Wake Forest University, and other institutionsLynn University. These are the same types of higher education. services and operations previously provided by the KHE segment which is now a part of the KNA business.
Transition and Operations Support Agreement (TOSA). Purdue Global operates largely online as an Indiana public university affiliated with Purdue University. The operations support activities that KHEKNA provides to Purdue Global (and other institutions of higher education, including Purdue University) include technology support, help-desk functions, human resources support for transferred faculty and employees, admissions support, financial aid processing, marketing and advertising, back-office business functions, certain test preparation, and domestic and international student recruiting services.
Pursuant to the TOSA, KHEKNA is not entitled to receive any reimbursement of costs incurred in providing support functions, or any fee, unless and until Purdue Global has first covered all of its operating costs (subject to a cap). If Purdue Global achieves cost efficiencies in its operations, itKNA may be entitled to an additional payment equal to 20% of such cost efficiencies (Purdue Efficiency Payment). In addition, during each of Purdue Global’s first five years, prior to any payment to KHE,KNA, Purdue Global is entitled to a priority payment of $10 million per year beyond costs.costs (Purdue Priority Payment). To the extent that Purdue Global’s revenue is insufficient to pay the priority payment, KHEPurdue Priority Payment, KNA is required to advance an amount to Purdue Global to cover such insufficiency. Upon closing of the transaction, Kaplan paid to Purdue


Global an advance in the amount of $20 million, representing, and in lieu of, priority paymentsa Purdue Priority Payment for Purdue Global’seach of the fiscal years ending June 30, 2019, and June 30, 2020.
To the extent that there is sufficient revenue to pay the Purdue Efficiency Payment, Purdue Global will be reimbursed for its operating costs (subject to a cap), and will be paid the priority payment to Purdue Global is paid.Priority Payment. To the extent that there is remaining revenue, KHEKNA will then receive reimbursementbe reimbursed for its operating costs (subject to a limit)cap) of providing the support activities. If KHEKNA achieves cost efficiencies in its operations, then KHEKNA may be entitled to an additional payment equal to 20% of such cost efficiencies (KHE(KNA Efficiency Payment). If there are sufficient revenues, KHE may alsoThe TOSA, as amended, reflects the parties’ intent that, subject to available cash (calculated as cash balance minus cash deficiencies, if any, projected for the next six-month period based on applicable budget), KNA is entitled to receive a fee equal to 12.5% of Purdue Global’s revenue. The fee will increase(increasing to 13% beginning with Purdue Global’s fiscal year endingfrom June 30, 2023, through June 30, 2027) of Purdue Global’s fiscalrevenue, which served as the deferred purchase price for the transfer of KU (Deferred Purchase Price). Separately, KNA is entitled to a fee for services provided equal to 8% of KNA’s costs of providing such services to Purdue Global (Contributor Service Fee). KNA’s Contributor Service Fee is deducted from any amounts owed to KNA for the Deferred Purchase Price. Together these payments are known as “Contributor Compensation.” In each case, the Contributor Compensation remains subject to available cash and the limitations of payment carry over from year ending June 30, 2027. Thereafter, the fee will return to 12.5%. Subject to certain limitations, a portion of the fee that is earned by KHE in one year may be carried over and instead paid to KHE in subsequent years. year.
After the first five years of the TOSA, KHEKNA and Purdue Global will be entitled to payments in a manner consistent with the structure described above, except that (i) Purdue Global will no longer be entitled to a priority paymentthe Purdue Priority Payment and (ii) to the extent that there are sufficient revenues after payment of the KHEKNA Efficiency Payment (if any), Purdue Global will be entitled to an annual payment equal to 10% of the remaining revenue after the KHEKNA Efficiency Payment (if any) is paid, subject to certain other adjustments.
The TOSA has a 30-year initial term, which will automatically renew for five-year periods unless terminated. After the sixth year, Purdue Global has the right to terminate the agreement upon payment of aan early termination fee equal to 1.25 times125% of Purdue Global’s total revenue forearned during the preceding 12-month period, which payment would be made pursuant to a 10-year note, and at the election of Purdue Global, it may receive for no additional
5


consideration certain tangible assets used by KHEKNA exclusively to provide the support activities pursuant to the TOSA. At the end of the 30-year term, if Purdue Global does not renew the TOSA, Purdue Global will be obligated to make a final payment of 75% of its total revenue earned during the preceding 12-month period, which payment will be made pursuant to a 10-year note, and at the election of Purdue Global, it may receive for no additional consideration certain assets used by KHEKNA exclusively to provide the support activities pursuant to the TOSA. Either party may terminate the TOSA at any time if Purdue Global generates (i) $25 million in cash operating losses for three consecutive years or (ii) aggregate cash operating losses greater than $75 million at any point during the initial term. Operating loss is defined as the amount of revenue Purdue Global generates minusby which the sum of (1) Purdue Global’s and KHE’sKNA’s respective costs in performing academic and support functions and (2) the $10 million priority payment to Purdue GlobalPriority Payment in each of the first five years.years following March 22, 2018, exceeds the revenue Purdue Global generates for the applicable fiscal year. Upon termination for any reason, Purdue Global will retain the assets that Kaplan contributed pursuant to the Transfer Agreement.TOSA. Each party also has certain termination rights in connection with a material default or material breach of the TOSA by the other party. Short of termination, Purdue Global has the right to take over (in-source) certain back-office support functions at any time with nine-months’ notice. Those include technology support, human resources, facility and property management, finance and accounting, communications, and default management. In 2022 Purdue Global began working with KNA to provide certain human resources, finance and accounting, facility management, and communications services itself, in-house.
Regulatory Environment
KHEEnvironment. KNA no longer owns or operates KU or any other institution participating in student financial aid programs that have been created under Title IV of the U.S. Federal Higher Education Act of 1965 (Higher Education Act), as amended (Title IV). KHE is a service providerKNA provides services to Purdue Global, Purdue University, Wake Forest University, Lynn University and other Title IV participating institutions. As a service provider under the U.S. Department of Education (ED) regulations, KHE is requiredinstitutions that may require KNA to comply with certain laws and regulations, including applicable statutory provisions of Title IV. KHEKNA also provides financial aid services to Purdue Global and, as such, meets the definition of a “third-party servicer” contained in the Title IV regulations. By virtueregulations to Purdue Global (but no other institution as of beingthe date of this report). As a third-party servicer, KHEKNA is also subject to applicable statutory provisions of Title IV and EDU.S. Department of Education (ED) regulations that, among other things, require KHEKNA to be jointly and severally liable with Purdue Globalits Title IV participating client institution(s) to the ED for any violation by Purdue Globalsuch client institution of any Title IV statute or ED regulation or requirement. Pursuant to ED requirements, PurdueKNA is responsible for any liability arising from the operation of the institution; however, pursuant to the agreement to transfer KU, KHE agreed to indemnify Purdue for certain pre-closing liabilities. KHE also is subject to other federal and state laws, including, but not limited to, federal and state consumer protection laws and rules prohibiting unfair or deceptive marketing practices, data privacy, data protection and information security requirements established by federal state and foreign governments, including for example the Federal Trade Commission as well asand the applicable provisions of the Family Educational Rights and Privacy Act regarding the privacy of student records.
KHE’s KNA’s failure to comply with these and other federal and state laws and regulations could result in adverse consequences to KHE’sKNA’s business, including, for example:
The imposition on KHEKNA and/or Kaplan of fines, other sanctions or liabilities, including, without limitation, repayment obligations for Title IV funds to the ED or the termination or limitation on KHE’sKaplan’s eligibility to provide services as a third-party servicer to Purdue Global or any other Title IV participating institution;
Adverse effects on KHE’sKNA’s business and results of operations from a reduction or loss in KHE’sKNA’s revenues under the TOSA or any other agreement with any Title IV participating institution if a client institution loses or has limits placed on its Title IV eligibility, accreditation, operations or state licensure, or is subject to fines, repayment obligations or other adverse actions due to non-compliancenoncompliance by KHEKNA (or the institution) with Title IV, accreditor, federal or state agency requirements;


Liability under the TOSA or any other agreement with any Title IV participating institution for non-compliancenoncompliance with federal, state or accreditation requirements arising from KHE’sKNA’s conduct; and
Liability for non-compliancenoncompliance with Title IV or other federal or state laws and regulations occurring prior to the transfer of KU to Purdue.
The laws, regulations and other requirements applicable to KNA or any KNA client institutions are subject to change and to interpretation. For example, a Negotiated Rulemaking began in October 2021 that covered, in part, rules related to the borrower defense to repayment adjudication process and recovery from institutions, closed school loan discharges, disability loan discharges, public loan forgiveness, income driven repayment plans and arbitration agreements. As part of this current Rulemaking, in a session that began in January 2022, the ED also proposed a change to the Title IV definition of “Nonprofit” institution to generally exclude from that definition any institution that is an obligor on a debt owed to a former owner of the institution or maintains a revenue-based service agreement with a former owner of the institution. Such regulatory changes as well as those described above could subject Purdue Global to additional regulatory requirements. Any resulting new rules or changes to existing rules are not likely to be effective until July 1, 2023.
Incentive compensation.compensation. Under the ED’s incentive compensation rule, an institution participating in Title IV programs may not provide any commission, bonus or other incentive payment to any person or entity engaged in any student recruiting or admission activities or in making decisions regarding the awarding of Title IV funds if such
6


payment is based directly or indirectly on success in securing enrollments or financial aid. KHEKNA is a third party providing bundled services to Title IV participating institutions that include recruiting and, in the case of Purdue Global, financial aid services. As such, KHEKNA is also subject to the incentive compensation rules as applied to the institutions it serves and cannot provide any commission, bonus or other incentive payment to any covered employees, subcontractors or other parties engaged in certain student recruiting, admission or financial aid activities based on success in securing enrollments or financial aid. In addition, tuition revenue sharing payments to KHEKNA under the TOSA (as well as any other agreement with any Title IV participating institution) must comply with revenue sharing guidance provided by the ED related to bundled services agreements. SeeFor more information, see Item 1A. Risk Factors,Factors. Failure to Comply Withwith the ED’s Title IV Incentive Compensation Rule Could Subject Kaplan to Liabilities, Sanctions and Fines for more information.Fines.
Misrepresentations.A Title IV participating institution is required to comply with the ED regulations related to misrepresentations and with related federal and state laws. These laws and regulations are broad in scope and may extend to statements by servicers, such as KHE,KNA, that provide marketing or certain other services to such institutions. The laws and regulations may also apply to KHE’sKNA’s employees and agents, with respect to statements addressing the nature of an institution’s programs, financial charges or the employability of its graduates. KHE provides certain marketingAdditionally, failure to comply with these and other federal and state laws and regulations regarding misrepresentations and marketing practices could result in the imposition on KNA or its client institutions of fines, other sanctions or liabilities, including, without limitation, federal student aid repayment obligations to the ED, the termination or limitation on KNA’s eligibility to provide services as a third-party servicer to Title IV participating institutions.institutions, the termination or limitation of a client institution’s eligibility to participate in the Title IV programs, or legal action by students or other third parties. A violation of misrepresentation regulations or other federal or state laws and regulations applicable to the services KHEKNA provides to its client institutions arising out of statements by KHE,KNA, its employees or agents could require KHE or its clientsKNA to pay the costs associated with indemnifying its client institutions from applicable losses. Additionally, failure to comply with theselosses resulting from the violation and other federal and state laws and regulations could result in the imposition on KHE of fines, or federal student aid repayment obligations to the ED or the termination or limitation on KHE’s eligibility to provide services as a third-party servicer to Purdue Global or any other Title IV participating institution.
Compliance reviews and litigation. As a third-party servicer providing financial aid services to a Title IV participating institution, KHE is subject to reviews, audits, investigations and other compliance reviews conducted by various regulatory agencies and auditors, including, among others, the ED, the ED’s Office of the Inspector General, accrediting bodies and state and various other federal agencies. These compliance reviews can result in findings of non-compliance with statutory and regulatory requirements that can, in turn, result in the imposition of fines, liabilities, civil or criminal penalties or other sanctions against KHE. KHE will be required, if it enters into contracts to provide financial aid services to more than one Title IV participating institution, to arrange for an independent auditor to conduct an annual Title IV compliance audit of KHE’s compliance with applicable ED requirements.or liabilities imposed on KNA.
On February 23, 2015, the ED began a program review assessing KU’s administration of its Title IV and Higher Education Act programs during the 2013-2014 and 2014-2015 award years. In 2018, Kaplan contributed the institutional assets and operations of KU to Purdue Global, and the university became Purdue Global, under the ownership and control of Purdue University. However, Kaplan retains liability for any financial obligations the ED might impose under this program review and that are the result of actions taken during the time that Kaplan owned the institution. On September 28, 2018, the ED issued a Preliminary Program Report (Preliminary Report). This Preliminary Report is not final, and the ED may change the findings in the final report. None of the initial findings in the Preliminary Report carries material financial liability. Although the program review technically covers only the 2013–2015 award years, the ED included a review of the treatment of student financial aid refunds for students who withdrew from a program prior to completion in 2017–2018. KHE cannot predict the outcome of this review, when it will be completed, whether any final findings of non-compliance with financial aid program or other requirements will impact KHE’s operations, or what liability or other limitations the ED might place on KHE or Purdue Global as a result of this review.
There are also two open program reviews at campuses that were part of the KHE Campuses business prior to its sale in 2015 to Education Corporation of America. The ED’s final reports on the program reviews at former KHE Broomall, PA, and Pittsburgh, PA, locations are pending. KHE retains responsibility for any financial obligations resulting from these program reviews.
Prior to the transfer to Purdue Global of the institutional assets and operations of KU, on September 3, 2015, Kaplan sold to Education Corporation of America (ECA) substantially all of the assets of KHE’s nationally accredited on-ground Title IV eligible schools (KHE Campuses). As part of the transaction, similar to the transfer of KU, Kaplan retained liability for the pre-sale conduct of the KHE schools. Although Kaplan no longer owns KU or the KHE Campuses, Kaplan may be liable to the current owners of KU and the KHE Campuses, respectively, for the pre-sale


conduct of the schools. Kaplan may also have liabilities in connection with certain real estate leases that were guaranteed by Kaplan.
Compliance by client institutions with Title IV program requirements and other federal, state and accreditation requirements.KHEKNA currently provides services to education institutions that are heavily regulated by federal and state laws and regulations and subject to extensive accrediting body requirements. Presently, a substantialmaterial portion of KHE’sKNA’s revenues are attributable to deferred purchase and service fees it receives under the TOSA, which are dependent upon revenues generated by Purdue Global and dependent upon Purdue Global’s eligibility to participate in the Title IV federal student aid program. To maintain Title IV eligibility, Purdue Global and KHE’sKNA’s other client institutions must be certified by the ED as eligible institutions, maintain authorizations by applicable state education agencies and be accredited by an accrediting commission recognized by the ED. Purdue Global and KHE’sKNA’s other client institutions must also comply with the extensive statutory and regulatory requirements of the Higher Education Act and other state and federal laws and accrediting standards relating to their financial aid management, educational programs, financial strength, disbursement and return of Title IV funds, facilities, recruiting practices, representations made by the school and other parties, and various other matters. Additionally, Purdue Global and other client institutions are subject to laws and regulations that, among other things, limit student default rates on the repayment of Title IV loans;loans, permit borrower defenses to repayment of Title IV loans based on certain conduct of the institution; establish gainful employment requirements, including certain debt-to-earnings metrics;institution, establish specific measures of financial responsibility and administrative capability;capability, regulate the addition of new campuses and programs and other institutional changes; require compliance with state professional licensure board requirements to the extent applicable to institutional programs and require state authorization and institutional and programmatic accreditation. If the ED finds that Purdue Global or other client institutions have failed to comply with Title IV requirements or improperly disbursed or retained Title IV program funds, it may take one or more of a number of actions, including, but not limited to:
fining the school;
requiring the school to repay Title IV program funds;
limiting or terminating the school’s eligibility to participate in Title IV programs;
initiating an emergency action to suspend the school’s participation in Title IV programs without prior notice or opportunity for a hearing;
transferring the school to a method of Title IV payment that would adversely affect the timing of the institution’s receipt of Title IV funds;
requiring the school to submit a letter of credit;
denying or refusing to consider the school’s application for renewal of its certification to participate in the Title IV programs or for approval to add a new campus or educational program; and
referring the matter for possible civil or criminal investigation.
7


If Purdue Global or other client institutions lose or have limits placed on their Title IV eligibility, accreditation or state licensure, or if they are subject to fines, repayment obligations or other adverse actions due to their or KHE’s non-complianceKNA’s noncompliance with Title IV regulations, accreditor or state agency requirements or other state or federal laws, KHE’sKNA’s financial results of operations could be adversely affected. After acquiring KU, on August 3, 2018, Purdue Global received an updated Provisional Program Participation Agreement (PPPA) from the ED which is necessary for continued participation in the federal Title IV programs after the change in ownership from Kaplan to Purdue. The PPPA expired on June 30, 2021, but continues in effect until the ED issues the final approved Program Participation Agreement. On October 15, 2021, Purdue Global received from the ED a new PPPA granting provisional certification until June 30, 2022. Under this PPPA, Purdue Global must apply for and receive approval for expansion or any substantial change before it may award, disburse or distribute Title IV funds based on the substantial change. Substantial changes generally include, but are not limited to: (a) establishment of an additional location; (b) increase in the level of academic offering beyond those listed in the institution's Eligibility and Certification Approval Report (ECAR); (c) addition of any educational program (including degree, non-degree or short-term training programs), or (d) the addition of any new degree program. In addition, the institution must pay any legislative,liabilities found in a currently open program review prior to the expiration of the PPPA. The provisional certification ends upon the ED's notification to the institution of the ED's decision to grant or deny a six-year certification to participate in the Title IV, Higher Education Act (HEA) programs.
Compliance, regulatory actions, reviews and litigation. KNA and its client institutions are subject to reviews, audits, investigations and other compliance reviews conducted by various regulatory agencies and auditors, including, among others, the ED, the ED’s Office of the Inspector General, accrediting bodies and state and various other federal agencies. These compliance reviews could result in findings of noncompliance with statutory and regulatory requirements that could, in turn, result in the imposition of fines, liabilities, civil or criminal penalties or other developmentsanctions against KNA and its client institutions. Separately, if KNA provides financial aid services to more than one Title IV participating institution (i.e., one or more participating institutions in addition to Purdue Global), it will be required to arrange for an independent auditor to conduct an annual Title IV compliance audit of KNA’s compliance with applicable ED requirements. KNA’s client institutions are also required to arrange for an independent auditor to conduct an annual Title IV compliance audit of their compliance with applicable ED requirements, including requirements related to services provided by KNA.
On May 6, 2021, Kaplan received a notice from the ED that it would be conducting a fact-finding process pursuant to the borrower defense to repayment (BDTR) regulations to determine the validity of more than 800 BDTR claims and a request for documents related to several of Kaplan’s previously owned schools. Beginning in July 2021, Kaplan started receiving the claims and related information requests. In total, Kaplan received 1,449 borrower defense applications that seek discharge of approximately $35 million in loans. Most claims received are from former KU students. The ED’s process for adjudicating these claims is subject to the borrower defense regulations but it is not clear to what extent the ED will exclude claims based on the underlying statutes of limitations, evidence provided by Kaplan, or any prior investigation related to schools attended by the student applicants. Kaplan believes it has defenses that would bar any student discharge or school liability including that the effectclaims are barred by the applicable statute of materially reducinglimitations, unproven, incomplete and fail to meet regulatory filing requirements. Kaplan expects to vigorously defend any attempt by the ED to hold Kaplan liable for any ultimate student discharges and is responding to all claims with documentary and narrative evidence to refute the allegations, demonstrate their lack of merit, and support the denial of all such claims by the ED. If the claims are successful, the ED may seek reimbursement for the amount discharged from Kaplan. If the ED initiates a reimbursement action against Kaplan following approval of former students’ BDTR applications, Kaplan may be subject to significant liability.
On September 3, 2015, Kaplan sold to Education Corporation of America (ECA) substantially all of the assets of the prior KHE Campuses. The transaction included the transfer of certain real estate leases that were guaranteed or purportedly guaranteed by Kaplan. ECA is currently in receivership, has terminated all of its higher education operations and has sold most, if not all, of its remaining assets (including New England College of Business). Additionally, the receiver has repudiated all of ECA’s real estate leases. Although ECA is required to indemnify Kaplan for any amounts Kaplan must pay due to ECA’s failure to fulfill its obligations under the real estate leases guaranteed by Kaplan, ECA’s current financial condition and the amount of Title IV financial assistancesecured and unsecured creditor claims outstanding against ECA make it unlikely that Kaplan will recover from ECA. In the second half of 2018, the Company recorded an estimated $17.5 million in losses on guarantor lease obligations in connection with this transaction in other non-operating expense. The Company recorded an additional estimated $1.1 million in non-operating expense in 2019, $1 million in non-operating expense in 2020, and $1.1 million in non-operating expense in 2021; in each case consisting of legal fees and lease costs. The Company continues to monitor the status of these obligations.
In addition, Kaplan could be the subject of future compliance reviews or lawsuits related to formerly owned KU and KHE schools in connection with the pre-sale conduct of such schools that could result in monetary liabilities or fines or other federal, state or private financial assistance available to the students of KHE’s client institutions could have a material adverse effect on KHE’s business and results of operations.sanctions against Kaplan.
8


Kaplan Test PreparationNorth America Supplemental Education
In 2018, Kaplan Test Preparation (KTP)2021, KNA’s supplemental education included testall products of the former KTP and KP segments, including exam preparation, data science educationprofessional licensure and certification, and corporate training and healthcare simulation businesses. Eachcontinuing education. KNA offers a wide array of these businesses isprograms and services across various markets focusing on lifetime value creation and professional lifecycles. These markets are discussed below.On February 28, 2018, Kaplan acquired the assets of i-Human Patients, Inc., a company that
Precollege and Social Sciences.KNA provides online, simulated patient interactionsexam preparation for use in traininghigh school and assessing medical health professionals. On September 14, 2018, Kaplan acquired the test prep, study aid and foreign language assets of Barron’s Educational Series. The acquisition included the “Barron’s” name and approximately 650 titles covering all test prep and study aid assets, as well as foreign language, reference, business and law titles.
Test Preparation.KTP’s admissions businesses preparegraduate students under the Kaplan Test Prep, Manhattan Prep and Barron’s Educational Series brands for a broad range of standardized, high-stakes tests, including the SAT, ACT, LSAT, GMAT MCAT and GRE. KTP’sKNA also provides admissions consulting, tutoring and other advisory services.
Healthcare. KNA provides exam preparation for the medical college admissions test (MCAT) and professional licensure exam preparation for physicians (USMLE), nurses (NCLEX), pharmacists (NAPLEX), dentists (NBDE) and physician assistants (PANCE). Under the brand i-Human Patients, KNA offers online, simulated patient interaction training for medical health professionals, which is typically purchased by medical, nursing and physician assistant schools. KNA’s USMLE in-person programs are accredited businesses, operatingand Student and Exchange Visitor Program (SEVP) approved for F-1 students and operate under the Kaplan Prep & Achieve brand, prepare studentsbrand. In 2021, KNA acquired a continuing medical education business for licensing exams required to enter certain professions, including nursing schools, medical schoolsphysicians, nurses and law schools. KTP also sells admissions consulting, tutoringpharmacists which is accredited by Joint Accreditation for Interprofessional Continuing Education and other advising services.
KTP delivers programs at numerous venues throughout the U.S., including Puerto Rico, as well as in Canada, Mexico and the U.K. Programs are taught at more than 70 Kaplan-branded locations and at numerous other locations, such as hotels, high schools and universities. KTP also offers courses and other programs online, typically in a live online classroom or a self-study format. Private tutoring services are provided in person in select markets and online. In addition, KTP licenses material for certain of its courses to third parties and to a Kaplan affiliate, which, during 2018, delivered courses at 68 locations in 30 countries outside the U.S. In 2018, KTP enrolled over 340,000 students in its courses and other programs, including more than 171,000 enrolled in online programs. Test Preparation includes Kaplan Publishing, which focuses on print test preparation resources sold through retail channelsoperated under the brand Projects in Knowledge.
Legal, Government and Social Justice. KNA offers exam preparation for the law school admissions test (LSAT) and state bar licensure exam preparation for lawyers in 50 jurisdictions through Kaplan Test Prep, Manhattan PrepBar Review and Barron’s Educational Series brands. AtPreliminary Multistate Bar Review (PMBR). For the endmilitary, KNA offers the Armed Services Vocational Aptitude Battery (ASVAB) that measures developed abilities and helps predict future academic and occupational success in the military and in 2021, Kaplan acquired Bluejacketeer which offers practice test questions for Navy advancement exams on a subscription basis.
Business and Financial. Professional licensure products are operated under the brands Dearborn Real Estate Education, Kaplan Real Estate Education, Bob Hogue School of 2018,Real Estate, Kaplan Publishing had approximately 1,100 titles in printFinancial Education, and digital formats.
In total, KTP prepares students for more than 200 standardized tests, the large majority of which are U.S. focused.
Data science. KTP operates Metis, an accredited and licensed data science school and training company with locations in New York, California, Illinois and Washington. Metis operates 12-week data science boot camps in each of its locations and conducts trainings for corporations around the world.
Simulation. i-Human Patients provides online, simulated patient interactions for use in training and assessing medical health professionals and is typically purchased by medical and nursing schools.


Kaplan Professional (U.S.)
Kaplan Professional (U.S.) (KP)Schweser. KNA helps professionals obtain certifications, licensures,licenses and designations thatto enable them to advance their careers. KP partnersAdditionally, KNA collaborates with organizations to solve their talent management challenges through customized corporate learning and development solutions. Through live and online instruction, KPKNA provides professional license test preparation, licensing and continuing education, as well as leadership and professional development programs to businesses and individuals in the accounting, insurance, securities, real estate, financial services and wealth management engineeringareas.
Technology and architecture industries.Engineering. KNA offers data science and analytics online courses and training for corporations under the brand name Metis. In 2022, Metis expects to focus on providing courses and programs to educational institutions for their students rather than direct to student sales. KNA also offers licensing exam preparation for engineers, architects and designers under the brand name PPI.
KP servesPublishing. Kaplan Publishing focuses on Kaplan Test Prep, Barron's, and Manhattan Prep test preparation and reference resources sold through retail channels. At the end of 2021, Kaplan Publishing had 1,182 products available in print and digital formats, including 368 digital products. In total, KNA test prep prepares students for more than 233 standardized tests, the large majority of which are U.S. focused.
In 2021, KNA served over 220,000 students through its exam preparation programs and related products (such as tutoring, online question banks and online practice tests), excluding sales of test prep books by third-party retailers. KNA exam preparation programs are taught online and at Kaplan-branded locations and at numerous other locations, such as hotels, high schools, universities and companies throughout the U.S., including Puerto Rico, as well as in Canada, Mexico and the U.K. KNA also licenses material for certain programs to third parties. Since the end of the first quarter of 2020, virtually all KNA exam preparation programs have been offered online, typically in a live online classroom or a self-study format, while some programs have continued in person. Private tutoring services are provided online and, in select markets, in person. In 2022, KNA expects to offer more in-person courses for select exam preparation offerings.
In 2021, KNA served approximately 3,5002,700 business-to-business clients including 166approximately 120 Fortune 500 companies. In 2018, more than 480,0002021, approximately 218,000 students used KP’sKNA’s professional licensure exam preparation offerings.
On May 4, 2018, KP acquired Professional Publications, Inc. (PPI), an independent publisher of professional licensing exam review materials and recognized leader in engineering, surveying, architecture and interior design licensure exam review products. PPI delivers courses and produces print and online materials for the Fundamentals of Engineering and various Professional Engineering exams in fields such as chemical, civil, electrical, mechanical and structural engineering.
9
On July 12, 2018, KP acquired the College for Financial Planning (CFFP). CFFP offers financial education and training to individuals seeking professional credentials, including the CERTIFIED FINANCIAL PLANNER™ (CFP®) mark, through comprehensive programs that lead to licensing, certification or graduate-level study. The acquisition complements KP’s existing CFP® certification education offerings and will add new professional designations and degrees to the KP portfolio. CFFP is accredited by the Higher Learning Commission (HLC).


TELEVISION BROADCASTING
Television Broadcasting
Graham Media Group, Inc. (GMG), a subsidiary of the Company, owns seven television stations located in Houston, TX; Detroit, MI; Orlando, FL; San Antonio, TX; Jacksonville, FL; and Roanoke, VA, as well as SocialNewsDesk, a provider of social-mediasocial media management tools designed to connect newsrooms with their users. The following table sets forth certain information with respect to each of the Company’s television stations:
Station, Location and

Year Commercial

Operation Commenced
National

Market

Ranking (a)
Primary

Network

Affiliation
Expiration

Date of FCC

License
Expiration Date

of Network

Agreement
Total Commercial

Stations

in DMA (b)
KPRC, Houston, TX, 19497th9thNBCAug. 1, 2022Dec. 31, 201920221417
WDIV, Detroit, MI, 194714th 15thNBCOct. 1, 20212029Dec. 31, 20192022810
WKMG, Orlando, FL, 195418th 17thCBSFeb. 1, 20212029April 6, 2019June 30, 20221118
KSAT, San Antonio, TX, 195731stABCAug. 1, 2022Dec.March 31, 202120261015
WJXT, Jacksonville, FL, 194742nd 43rdNoneFeb. 1, 2021202979
WCWJ, Jacksonville, FL, 196642nd 43rdCWFeb. 1, 20212029Aug. 31, 2021202579
WSLS, Roanoke, VA, 195268th 71stNBCOct. 1, 20202028Dec. 31, 2019202278
 _________________________________________________________________________________
(a) Source: 2018/20192021/2022 Local Television Market Universe Estimates, The Nielsonthe Nielsen Company, September 2018,November 2021 and January 1, 2022, based on television homes in DMA (see note
(b) below).
(b) Full-power commercial TV stations, Designated Market Area (DMA) is a market designation of Thethe Nielsen Company that defines each television market exclusive of another, based on measured viewing patterns.
In January 2017, GMG acquired WCWJ, a CW affiliate television station in Jacksonville, FL, and WSLS, an NBC affiliate television station in Roanoke, VA. GMG operates both stations under the network affiliations in effect prior to their acquisition.
Revenue from broadcasting operations is derived primarily from the sale of advertising time to local, regional and national advertisers. In 2018,2021, advertising revenue accounted for 68.5%57.7% of the total for GMG’s operations. Advertising revenue is sensitive to a number of factors, some specific to a particular station or market and others more general in nature. These factors include a station’s audience share and market ranking; seasonal fluctuations in demand for air time;airtime; annual or biannual events, such as sporting events and political elections; and broader economic trends, among others.
Regulation of Broadcasting and Related Matters
GMG’s television broadcasting operations are subject to the jurisdiction of the U.S. Federal Communications Commission (FCC) under the U.S. Federal Communications Act of 1934, as amended (the Communications Act). Each GMG television station holds an FCC license that is renewable upon application for an eight-year period. As shown in the table above, the current terms of the GMG station licenses expire in 2022 through 2029. GMG expects the FCC to grant future renewal applications for its stations in due course, but cannot provide any assurances that the FCC will do so.
Digital Television (DTV) and Spectrum Issues. Each GMG station (and each full-power television station nationwide) now broadcasts only in a digital format, which allows transmission of HDTV programming and multiple channels of standard-definition television programming (multicasting).


Television stations may receive interference from a variety of sources, including interference from other broadcast stations, that is below a threshold established by the FCC. That interference could limit viewers’ ability to receive television stations’ signals. The amount of interference to stations could increase in the future because of the FCC’s decision to allow electronic devices, known as “white space” devices, to operate in the television frequency band on an unlicensed basis on channels not used by nearby television stations.
In November 2017, the FCC voted to adopt rules authorizing broadcast television stations to voluntarily transition to a new technical standard, called Next Generation TV or ATSC 3.0. The new standard is designed to allow broadcasters to provide consumers with better sound and picture quality; hyper-localized programming, including news and weather; enhanced emergency alerts and improved mobile reception. The standard also allows for the use of targeted advertising and more efficient use of spectrum, potentiallyfor example, by allowing for more multicast streams to be aired on the same six-megahertz channel. ATSC 3.0 is not backwardsbackward compatible with existing television equipment, and the FCC’s recently adopted rules require full-power television stations that transition to the new standard to continue broadcasting a signal in the existing DTV standard until the FCC phases out the requirement in a future order. A transitioning station’s DTV-formatted content must be substantially similar to the programming aired on its ATSC 3.0 channel until July17, 2023, five years from the date the rules in the original 2017 FCC order were finalized. In June 2020, the FCC re-affirmed this sunset date, but stated that it would open a proceeding one year prior to the sunset date to determine whether the date should be extended.
GMG launched its first ATSC 3.0 stream in December 2020 for station WDIV-TV in Detroit; prior to the launch, WDIV-TV had applied for and was granted authority by the FCC to effectuate an ATSC 3.0 simulcasting arrangement with WMYD (licensed to Scripps Broadcasting Holdings, LLC) in the Detroit area. In 2021, two GMG
10


stations each entered into simulcasting arrangements. First, in June 2021, GMG station WKMG-TV (Orlando) applied for and was granted authority by the FCC to effectuate an ATSC 3.0 simulcasting arrangement with another station in the Orlando area (WRBW-DT, licensed to Fox Television Stations, LLC). The station’s ATSC 3.0 stream was then launched along with the rest of the market on June 30, 2021. Second, in November 2021, GMG station KPRC-TV (Houston) applied for and was granted authority by the FCC to effectuate an ATSC 3.0 simulcasting arrangement with another station in the Houston area (KIAH, licensed to Tribune Media Company). The station’s ATSC 3.0 stream was then launched on December 2, 2021. As required by the FCC rules, each of the respective station’s stream is in addition to such station’s current DTV stream, which viewers continue to be able to view.
In connection with the transition to ATSC 3.0, which is an internet protocol-based standard, the FCC has updated its rules to reflect how broadcasters may use their spectrum in non-traditional ways (Broadcast Internet). In June 2020, the FCC issued a Declaratory Ruling clarifying that the television ownership rules would not apply to the lease of broadcast spectrum for Broadcast Internet purposes, and in December 2020, the FCC voted to adopt rules that specifically apply its existing framework regarding derogation of service and use of spectrum for ancillary and supplementary purposes to Broadcast Internet; i.e., a broadcaster must continue to air at least one free, over-the-air television signal in SDTV format, and if a broadcaster opts to use its spectrum for Broadcast Internet services, it will incur a five years.percent fee based on the gross revenue received by the broadcaster. It is too soon to predict how the use of broadcast spectrum for Broadcast Internet services could impact the industry.
In April 2017, the FCC announced the completion of an incentive auction in which certain broadcast television stations bid to relinquish spectrum or move to a different spectrum band in exchange for a share of the revenues obtained by auctioning the reallocated broadcast spectrum for use by wirelessbroadband providers. None of GMG’s stations wonparticipated in the incentive auction. However, certain GMG stations—specifically, WDIV, WSLS, WCWJ and WJXT—will bewere required to move to new channel allotments so asin order to free up a nationwide block of spectrum for wireless broadband use. The FCC has adopted rules requiring this “repacking” of broadcast television stations to new channels to be completed within 39 months after the incentive auction closed, with earlier deadlines set for particular stations in order to stagger the transition to new channels. The scheduledWSLS transition deadlines for was completed on September 11, 2019, the WCWJ and WJXT transitions were completed on January 16, 2020, and the WDIV transition was completed on September 16, 2020 (following tolling of its assigned deadline due to delays related to the COVID-19 pandemic).
GMG’s repacked stations are as follows:
WSLS: September 6, 2019
WCWJ and WJXT: January 17, 2020
WDIV: March 13, 2020
The repacking and incentive auction processes could have an adverse effect on GMG. For example, the repacking of GMG’s stations and/or neighboring stations may result in increased interference to the GMG stations’ signals or otherwise affect the stations’ over-the-air coverage. Although GMG’s repacked stations arebeen eligible to seek reimbursementfor repacking-related costs and have been receiving reimbursement payments through the FCC’s process. Congress has capped the overall funds available for repack-related reimbursements. The initial legislation authorizing the incentive auction provided only $1.75 billion in total for all such reimbursements. In March 2018, Congress allocatedlater made available an additional $1 billion for the repack, includingin reimbursement funds, that could be used toward reimbursing expenses for “repacked” low-power television (LPTV) stationswith $600 million in available funds allocated to 2018 and TV translators.$400 million allocated to 2019.
From late 2017 through April 2018, the FCC issued a series of Public Notices announcing the reimbursement estimates for all entities eligible for reimbursement, after such estimates were reviewed and adjusted by the FCC’s reimbursement fund administrator and then further adjusted to reflect the additional congressional appropriation. To date, each repacked commercial television station, including each of the repacked GMG stations, has been allocated a reimbursement amount equal to approximately 92.5%94% of the station’s estimated repacking costs, as verified by the FCC’s fund administrator. Receipt of the allocationallocated funds is subject to FCC approval of particular requests for reimbursement of actual costs fullyincurred.
By October 8, 2021, stations that transitioned in the first half of the 39-month post-auction repack had to submit all remaining invoices for incurred expenses. WSLS, which transitioned in the first half of the post-auction repack, complied with this deadline. The FCC adopted rulemaking in August 2018 addressing a number of issues, including the amount of funds that should be made available for reimbursements for LPTV and TV translator stations. This proceeding is still ongoing, so the Company cannot predictremaining GMG stations must submit all remaining invoices, to the extent to which there are any, in 2022. As of December 31, 2021, the repacked GMG stations will be compensated have received approximately $19.6 million in FCC reimbursements since 2018.
In March 2020, the FCC announced the reformation of the 3.7-4.2 GHz band (C-band) through a public auction of the lower 280 megahertz of these frequencies (3.7-3.98 GHz). This auction, which concluded February 2021, allows winning bidders to use the 3.7-3.98 GHz frequencies for any non-full-powerwireless broadband services. However, this spectrum reallocation requires the relocation of incumbent C-band satellite operations—including those used to deliver programming to television expenses that they incur in connectionstations—to a “repacked” 4.0-4.2 GHz band. In exchange for a portion of the auction proceeds, satellite operators have chosen to relocate their operations pursuant to an “accelerated” relocation timeline.
GMG’s television stations receive programming from the relocating satellite operators, and this requires the transition of operations at GMG stations through the installation of antenna filters, repointing and retuning of antennas, and other activities. Although GMG elected to have the satellite operators manage these transition efforts, GMG coordinated with the repacking. satellite operators and submitted various filings to the FCC to confirm the transition eligibility of its stations and ensure the stations remain protected from harmful interference post-transition.
The first phase of the “accelerated” C-band transition concluded December 5, 2021, and the deadline for the second phase is December 5, 2023. GMG anticipates that the satellite operators and the FCC may request additional information about GMG’s stations to complete the second phase of the transition.
11


Carriage of Local Broadcast Signals.  Congress has established, and periodically has extended or otherwise modified, various statutory copyright licensing regimes governing the local and distant carriage of broadcast television signals on cable and satellite systems. The Company cannot predict whether or how Congress may maintain or modify these regimes in the future, noror what net effect such decisions would have on the Company’s broadcast operations or on the Company overall.
The Communications Act and the FCC rules allow a commercial television broadcast station, under certain circumstances, to insist on mandatory carriage of its signal on cable systems serving the station’s market area (must carry). Alternatively, stations may elect, at three-year intervals, to foregoforgo must-carry rights and allow their signals to be carried by cable systems only pursuant to a “retransmission consent” agreement. Commercial television stations also may elect either mandatory carriage or retransmission consent with respect to the carriage of their signals on direct broadcast satellite (DBS) systems that provide “local-into-local” service (i.e., to distribute the signals of local television stations to viewers in the local market area). Stations that elect retransmission


consent may negotiate for compensation from cable or DBS systems in exchange for the right to carry their signals. Each of GMG’s television stations has elected retransmission consent for both cable and DBS operators, and each is carried on all of the major cable and DBS systems serving each station’s respective local market pursuant to retransmission consent agreements. Retransmission consent elections must be made every three years. The most recent election deadline was October 1, 2020; all GMG stations elected retransmission consent for both cable and DBS operators. The 2020 election process was less time-intensive than prior processes, as the FCC in July 2019 moved to an electronic election system that now allows broadcasters to post their carriage elections online and to send notices to covered MVPDs electronically. The next election deadline is October 1, 2023 and will follow the same process.
Recent statutory changes have required the FCC to modify its rules governing retransmission consent negotiations. The Television Viewer Protection Act, enacted on December 20, 2019, made changes to the “good faith” standards for retransmission consent negotiations, calling for the FCC to implement regulations requiring “large station groups” (groups of television broadcast stations that have a national audience reach of more than 20%) to negotiate in good faith with MVPD “buying groups” (entities that negotiate on behalf of multiple small MVPDs). GMG does not qualify as a “large station group” under the statute and therefore will not be subject to this obligation. While GMG does not anticipate that these recent changes will materially affect its bargaining position in retransmission consent negotiations, if Congress or the FCC were to enact further changes to the retransmission consent rules (such as by requiring small station groups like GMG to negotiate with MVPD buying groups, or otherwise giving MVPDs heightened bargaining power), such changes could have a material effect on retransmission consent revenues.
The FCC has also considered proposals to alter its rules governing retransmission consent negotiations, network non-duplication and syndicated exclusivity. For example, pursuant tothe STELA Reauthorization Act (STELAR), enacted in DecemberIn March 2014, the FCC adopted rules prohibiting same-market television broadcast stations from coordinating or jointly negotiating for retransmission consent unless such stations are under common control, and it considered, though ultimately did not adopt, changes to its “good faith” standards for retransmission consent negotiations. In addition, the FCC in March 2014 solicited comments on a proposal to eliminate its network non-duplication and syndicated exclusivity rules, which restrict the ability of cable operators, direct broadcast satellite systems and other distributors classified by the FCC as multichannel video programming distributors (MVPDs)MVPDs to import the signals of out-of-market television stations with duplicatingduplicate programming during retransmission consent disputes or otherwise. The FCC has not acted on that proposal to date. If Congress or the FCC were to enact further changes to the retransmission consent and/or exclusivity rules, such changes could materially affect the GMG stations’ bargaining position in future retransmission consent negotiations.
Ownership Limits.The Communications Act and the FCCs rules limit the number and types of media outlets in which a single person or entity may have an attributable interest. The FCC is required by statute to review its media ownership rules (with the exception of the national television ownership rule, discussed below) every four years to determine whether those rules remain necessary in the public interest as the result of competition. This process is referred to as the quadrennial review. In November 2017, the FCC conducted such a review and voted to eliminate certain of theseits ownership limit restrictions and to modify others. For instance, This FCC decision was challenged in court, and the Third Circuit Court of Appeals set aside the FCC’s decision in November 2019. However, the FCC votedappealed the Third Circuit court’s decision, and on April 1, 2021, the U.S. Supreme Court reversed that decision. This means that the media ownership rules now reflect the November 2017 changes. The current ownership rule most relevant to eliminate a standard known asGMG is the “Eight Voices Test,” which generally prohibitedlocal television ownership rule. The rule prohibits one broadcaster from owning (or having an attributable interest in) two commercialfull-power television stations licensed to the same Nielsen DMA if both of them are ranked among the top four stations in the same market, from combining ownership ifunless the transaction would result in fewer than eight independently owned stations remaining in the market. This changebroadcaster can demonstrate to the local televisionownership (or “duopoly”)rule meansFCC that the ownership rules generallywill permit a party to own up to two commercial television stations in a market so long as one of the stations is not among the top-four ranked television stations in that market.The FCC voted to retain the existing prohibition on transactions that would result in common ownership among the top-four ranked stations in the same market, subject to potential exceptions to the prohibition based on public interest showings made on a case-by-case basis. In addition, the FCC voted to eliminate the newspaper/broadcast cross-ownership rule, which had prohibited a single entity from owning a full-power broadcast station and a daily print newspaper in the same local market, and the television/radio cross-ownership rule, which imposed specific limits on the ability to own television and radio stations in the same market (in addition to the separate limits on the number of television or radio stations a party could own in the market). The FCC also voted to eliminate a rule making certain television joint sales agreements (JSAs) attributable in calculating compliance with the ownership limits. The FCC will continue to require public disclosure of certain shared services agreements (SSAs) though these agreements are not considered attributable. The changes adopted in the FCC’s November 2017 order have been challenged in court. In addition, in December 2018, the FCC initiated a statutorily mandated Quadrennial Review of its broadcast ownership rules to determine whether they continue to servecombination serves the public interest. Ownership of more than two full-power television stations is generally prohibited.
The FCC’s most recent quadrennial review of its media ownership rules was initiated in December 2018. That proceeding remains open. In June 2021, the FCC solicited comments to refresh the record, but no action has been taken in that proceeding to date. GMG’s ability to enter into certain transactions in the future may be affected by the outcomeresolution of the court challenges as well ascurrent FCC quadrennial review proceeding.
Under the FCC’s Quadrennial Review proceeding.
In addition, by statute,national television ownership rule, a single person or entity may have an attributable interest in an unlimited number of television stations nationwide, as long as the aggregate audience reach of such stations does not exceed 39% of nationwide television households and as long as such interest complies with the FCC’s other
12


ownership restrictions. TheIn 2016, the FCC in 2016 eliminated the 50% “UltraUltra High Frequency (UHF) discount, under which stations broadcasting on UHF channels are credited with only half the number of households in their market for purposes of calculating compliance with the 39% cap. However, the FCC reversed that decision in early 2017, concluding that the UHF discount should not be altered except in connection with a broader review of the national ownership cap. The reinstatement of the UHF discount was upheld by the D.C. Circuit in the summer of 2018.
In a December 2017, rulemaking, the FCC initiated a newrule making proceeding to seekseeking comments regarding its authority to modify or eliminate the national television ownership cap, which was set at 39% by statute, as well as the potential elimination of the UHF discount. The FCC has received comments on its rulemaking but has not yet implemented final rules.That proceeding remains open.
Programming.Six of GMG’s seven stations are affiliated with one or more of the national television networks that provide a substantial amount of programming to their television station affiliates. The expiration dates of GMG’s affiliation agreements are set forth at the beginning of this Television Broadcasting section. WJXT, one of GMG’s Jacksonville stations, has operated as an independent station since 2002. In addition, each of the GMG stations receives programming from syndicators and other third-party programming providers. GMG’s performance depends in part on the quality and availability of third-party programming, and any substantial decline in the quality or availability of this programming could materially affect the ability of GMG and its competitors to enter into certain transactions in the future.
Public Interest Obligations.To satisfy FCC requirements, stations generally are expected to air a specified number of hours of programming intended to serve the educational and informational needs of children and to complete reports on a quarterly basis concerning children’s programming. TheIn July 2019, the FCC has initiated a rulemaking to


determine whether certain ofmodified these requirements should be modifiedrules to provide broadcasters with more flexibility in meeting the public interest obligations. Among other things, these rules allow up to 52 hours per year of children’s programming to consist of educational specials and/or short-form programming. The prior rules required all qualifying programming to be regularly scheduled and in 30-minute blocks. While stations are required to air the substantial majority of their educational and informational children’s programming on their primary program stream, under the current rules they may now air up to 13 hours per quarter of regularly scheduled weekly programming on a multicast stream. In addition, the FCC requires stations to limit the amount of advertising that appears during certain children’s programs.
The FCC has other regulations and policies to ensure that broadcast licensees operate in the public interest, including rules requiring the disclosure of certain information and documents in an online public inspection file; rules requiring the closed-captioning of programming to assist television viewing by the hearing impaired; video description rules to assist television viewing by the visually impaired; rules concerning the captioning of video programming distributed via the Internet;internet; and rules concerning the volume of commercials. Compliance with these rules imposes additional costs on the GMG stations that could affect GMG’s operations. However, the FCC has taken some measures to reduce burdens related to keeping physical copies of licenses posted and submitting paper copies of contracts, for example. The FCC also has an open proceeding to determine whether to remove other filing requirements.
Political Advertising.The FCC regulates the sale of advertising by GMG’s stations to candidates for public office and imposes other obligations regarding the broadcast of political announcements more generally.generally, including the disclosures of certain information related to such advertising in the station’s online public inspection file. The application of these regulations may limit the advertising revenues of GMG’s television stations during the periods preceding elections. Failure to comply with the political advertising rules may result in enforcement actions by the FCC. The Company has procedures in place regarding compliance with the FCC’s political advertising rules, but cannot predict how the FCC’s future application of these rules will affect GMG’s stations.
Broadcast Indecency.The FCC’s policies prohibit the broadcast of indecent and profane material during certain hours of the day, and the FCC may impose monetary forfeitures when it determines that a television station has violated that policy. Broadcasters have repeatedly challenged these rules in court, arguing, among other things, that the FCC has failed to justify its indecency decisions adequately, that the FCC’s policy is too subjective to guide broadcasters’ programming decisions and that its enforcement approach otherwise violates the First Amendment. In June 2012, the U.S. Supreme Court held that certain fines against broadcasters for “fleeting expletives” were unconstitutional because the FCC failed to provide advance notice to broadcasters of what the FCC deemed to be indecent, but it also upheld the FCC’s authority to regulate broadcast decency. The Company cannot predict how GMG’s stations may be affected by the FCC’s current or future interpretation and enforcement of its indecency policies.
Other Matters. The In addition to the matters described above, the FCC is conducting proceedings concerning various other matters, in addition to those described in this section. Thethe outcome of these proceedings and other matters described in this sectionwhich could adversely affect the profitability of GMG’s television broadcasting operations.
Other ActivitiesMANUFACTURING
Hoover Treated Wood Products, Inc.
Hoover Treated Wood Products, Inc. (Hoover) is a supplier of pressure impregnated kiln-dried lumber and plywood products for fire-retardant and preservative applications. Hoover, founded in 1955 and acquired by the Company in
13


2017, is headquartered in Thomson, GA. It operates nine10 facilities across the country and services a stocking distributor network of more than 100 locations spanning the U.S. and Canada. Hoover is constructing a 10th facility that is expected to commence operations in the second quarter of 2019.
Group Dekko Inc.
Group Dekko Inc. (Dekko) is an electrical solutions company that focuses on innovative power charging and data systems; industrial and commercial indoor lighting solutions; and the manufacture of electrical components and assemblies for medical equipment, transportation, industrial and appliance products. Dekko, founded in 1952, is headquartered in Garrett,Fort Wayne, IN, and operates 13 facilities in five states and Mexico. Dekko acquired Furnlite in July 2018.
Joyce/Dayton Corp.
Joyce/Dayton Corp. (Joyce/Dayton) is a leading manufacturer of screw jacks, linear actuators and related linear motion products and lifting systems in North America. Joyce/Dayton provides its lifting and positioning products to customers across a diverse range of industrial end markets, including renewable energy, metals and metalworking, oil and gas, satellite antennae and material handling sectors.
Forney Corporation
Forney Corporation (Forney) is a global supplier of burners, igniters, dampers and controls for combustion processes in electric utility and industrial applications. Forney is headquartered in Addison, TX, and its manufacturing plant is in Monterrey, Mexico. Forney’s customers include power plants and industrial systems around the world.


HEALTHCARE
Graham Healthcare Group
Graham Healthcare Group (GHG) provides home health, hospice and palliative services to more than 50,000 patients annually. GHG operates 1013 home care, seven hospice and two palliative care operating units in Michigan, Illinois, Pennsylvania and Pennsylvania.Florida. Six of GHG’s 19 operating units are operated through joint ventures with health systems and physician groups. The remainder are wholly owned and operated under the “Residential” brand name. Home health services include a wide range of health and social services delivered at home to recovering, disabled and chronically or terminally ill persons in need of medical, nursing, social or therapeutic treatment and/orand assistance with the essential activities of daily living. Hospice care focuses on relieving symptoms and supporting patients with a life expectancy of six months or less. Hospice care involves an interdisciplinary approach to the provision of medical care, pain management and emotional and spiritual support, with an emphasis on comfort, not curing. Hospice services can be provided in the patient’s home, as well as in freestandingfree-standing hospice facilities, hospitals, nursing homes and other long-term-carelong-term care facilities. Palliative care is a specialized form of medicine provided by nurse practitioners that aims to enhance the quality of life of patients and their families who are faced with serious illness. It focuses on increasing comfort through prevention and treatment of distressing symptoms. In addition to expert symptom management, palliative care focuses on clear communication, advance planning and coordination of care. Each GHG operating unit offers care coordination, healthcare solutions and clinical expertise. All home health and hospice operations are Medicare certified and accredited by the Accreditation Commission for Health Care (ACHC), or are in the process of being ACHC accredited. GHG derives 90% of its revenues for home health and hospice services from Medicare. The remaining sources of revenue are from Medicaid, commercial insurance and private payers.
SocialCodeIn 2019, GHG acquired two business units, Clinical Specialty Infusions, LLC (CSI Pharmacy) located in Texarkana, Texas, and Clarus Care, LLC (Clarus) in Nashville, Tennessee. CSI Pharmacy is a nationwide specialty pharmacy licensed in 38 states that serves patients suffering from chronic illness. CSI Pharmacy specializes in treating rare diseases with biologics and plasma-derived therapies, with revenues derived primarily from intravenous immunoglobulin (IVIG) therapy. CSI Pharmacy delivers products to patients’ houses and employs nurses to provide specialized infusion therapies in the home on a monthly basis. Clarus provides call management solutions to physician groups and hospitals. Clarus replaces traditional human-staffed answering services with a SaaS-based solution. Clarus streamlines calls, eliminates patient hold times, and manages referrals and new appointments. The solution eliminates delays, call routing errors and malpractice risk inherent with traditional call centers.
In December 2021, GHG acquired two businesses, one of which expanded GHG’s home health operations into Florida and Weiss Medical, a full service physician practice based in Riverdale, New Jersey. Weiss has expertise in all allergic and immunologic conditions, and specializes in challenging cases. It is often able to help patients even after they have seen numerous other specialists. The practice also offers infusion services.
14


AUTOMOTIVE
Graham Automotive LLC
Social Code LLC (SocialCode)The Company owns a 90% interest in four automotive dealerships. In January 2019, the Company acquired a 90% interest in two automobile dealerships in the Washington, D.C. area, Honda of Tysons Corner in Virginia and Lexus of Rockville in Maryland. The two dealerships are established automotive retailers. In December 2019, the Company opened a new Jeep dealership in Bethesda, MD. In December 2021, the Company acquired a 90% interest in an automobile dealership, Ford of Manassas in Virginia. The Company has a management services agreement with an entity affiliated with Christopher J. Ourisman, a member of the Ourisman Automotive Group family of dealerships, to operate and manage the operations of the dealerships. The Company also owns CarCare To Go, which provides valet repair services to and from a network of dealership service centers in the Washington, D.C. area.
OTHER ACTIVITIES
Leaf Group Ltd.
In June 2021, the Company acquired Leaf Group Ltd. (Leaf), headquartered in Santa Monica, California. Leaf is a diversified consumer internet company that builds creator-driven brands in lifestyle and home and art design categories. Through its Society6 Group, Leaf operates leading art and design marketplaces where large communities of artists and designers can market and sell their original art and designs printed on a wide variety of products. Its made-to-order marketplaces, consisting of Society6.com (Society6) and its wholesale channel (collectively, Society6 Group), provide artists and designers with an online commerce platform to feature and sell their original art and designs on an array of consumer products primarily in the home décor category. Society6 Group’s wholesale channel sells products to trade and hospitality clients, as well as retail distribution partners. Through Leaf’s Saatchi Art Group, including SaatchiArt.com (Saatchi Art) and its art fair event brand, The Other Art Fair, Leaf provides an online art gallery where a global community of artists exhibit and sell their original artwork directly to consumers through a curated online gallery, virtual reality or in-person at art fairs hosted in the United Kingdom, Australia, Canada and the United States. Saatchi Art’s online art gallery features a wide selection of original paintings, drawings, sculptures and photography. Leaf’s Media Group consists of a diverse portfolio of media properties that educate and inform consumers across a wide variety of life topics, including fitness and wellness brands such as Well+Good and Livestrong.com, Hunker in the home and design space and Only In Your State in the travel sector. Together with these premium brands, Leaf owns and operates or hosts and operates over 45 websites focused on specific categories or interests. Leaf generates the majority of its media revenue from the sale of advertising.
Clyde’s Restaurant Group
In July 2019, the Company acquired Clyde’s Restaurant Group (Clyde’s). Clyde’s, founded in 1963, owns and operates 11 restaurants and entertainment venues in the Washington, D.C. metropolitan area, including seven Clyde’s locations, Old Ebbitt Grill, The Hamilton, 1789 Restaurant, and The Tombs.
Framebridge, Inc.
In May 2020, the Company acquired an additional interest in Framebridge, Inc. (Framebridge), a custom framing service company, that resulted in the Company’s ownership of approximately 93% of Framebridge. The CEO of Framebridge continues to hold an approximately 7% ownership stake in Framebridge. Framebridge provides high-quality, affordable and fast custom framing directly to consumers. Through its website, app, and retail locations, Framebridge offers consumers the option to drop off or ship artwork, pictures and other personal objects directly to Framebridge to be custom framed and then delivered directly to a customer or a retail store for in-store pick up. Framebridge is headquartered in Washington, D.C., has 5 retail locations in the Washington, D.C./Maryland/Northern Virginia market, three locations in Manhattan and Brooklyn, NY, three in the Chicago market, two locations in Atlanta, GA, one each in the Boston and Philadelphia markets, and two manufacturing facilities in Kentucky and New Jersey.
Code3
Code3 is a marketing and insights company that manages digital advertising for global brands and early stageearly-stage companies. It delivers softwaremedia, creative, and servicedata services to transform consumer and performance data into planning, content, media activation and measurement to maximize ROI. SocialCodeCode3 works across platforms such as Facebook, Instagram, Amazon, Google, Twitter, Pinterest, Snapchat and YouTube. The legacy business surrounding the Audience Intelligence Platform (AIP) has been operated since the beginning of 2021 as a separate software company under the name, Decile LLC. “Code3” is the trade name of Social Code, LLC and Marketplace Strategy, LLC.
15


Decile LLC
Decile LLC (Decile) is a customer data and analytics software company that helps marketers extract value from their proprietary first-party customer and sales data. Decile provides software and services to help its business clients better understand customer acquisition costs, customer retention, unit economics and how to increase profitable growth.
The Slate Group LLC
The Slate Group LLC (Slate) publishes Slate, an online magazine. Slate features articles and podcasts analyzing news, politics and contemporary culture and adds new material on a daily basis. Content is supplied by the magazine’s own editorial staff, as well as by independent contributors. As measured by The Slate Group, Slate had an average of more than 1821 million unique visitors per month and averaged more than 7355 million page views per month across desktop and mobile platforms in 2018.2021. The Slate Group owns an interest in E2J2 SAS, a company incorporated in France that produces two French-language news magazine websites at slate.fr and slateafrique.com. The Slate Group provides content, technology and branding support.
Panoply Media
Panoply Media (Panoply) provides podcast technology for publishers and advertisers through the Megaphone platform and Megaphone Targeted Marketplace (MTM). Megaphone is a proprietary software as a service (SaaS) platform that provides hosting and dynamic advertising insertion designed to connect publishers with tools to publish, monetize and measure their audio content. MTM is an advertising marketplace that provides advertisers with the ability to target more than 60,000 audience segments across diverse audiences based on a listener’s location, interests, demographic profile and purchase behaviors.
Pinna
Pinna is an audio-first children’s media company offering an on-demand subscription service that delivers curated audio programming for children, all in one place, including podcasts, audio shows, audiobooks and music. The service offers children an ad-free, screen-free way to play and listen. Pinna creates and produces award-winning, original shows and partners with best-in-class brands and top creative talent to deliver age-appropriate, high-quality, highly entertaining audio experiences for 3-three- to 8-year-olds.12-year-olds.
The FP Group
The FP Group produces Foreign Policy magazine and the ForeignPolicy.com website, which cover developments in national security, international politics, global economics and related issues. The site features blogs, unique news content and specialized channels and newsletters focusing on regions and topics of interest. The FP Group provides insight and analysis into global affairs for government, military, business, media and academic leaders. FP Events also produces a growing rangenumber of live programs,and virtual events, bringing together government, military, business and investment leaders to discuss important regional and topical developments and their implications.


CyberVista LLC
CyberVista LLC (CyberVista) is a cybersecurity training company headquartered in Arlington, VA. Its training solutions span cyber protection, operations, cloud and hardware/software. Its Resolve executive training suite helps large company boards and executives prepare for and mitigate cyber threats. Customers include Fortune 500 firms,companies, leading cybersecurity providers and federal agencies.the defense industrial base.
City Cast LLC
CompetitionCity Cast LLC (City Cast) is a network of daily local news podcasts in cities around the country, accompanied by a daily email newsletter about local communities, including local news, events and places. Currently City Cast is available in Chicago, Denver, Houston, Salt Lake City and Pittsburgh.
COMPETITION
Kaplan
Kaplan’s businesses operate in fragmented and competitive markets. Each of Kaplan International’s (KI)KI businesses competes in disaggregated markets with other for-profit institutions and companies (ranging in size from large for-profit universities to small competitors offering English-language courses) and, in certain instances, with government-supported schools and institutions that provide similar training and educational programs. Competitive factors vary by business and include program offerings, ranking of university partners, convenience, quality of instruction, reputation, placement rates, student services and cost. KI derives its competitive advantage from, among other things, delivering high-quality education and training experiences to students, having name brand recognition across multiple markets, developing strong relationships with corporate clients and recruitment partners and offering competitive pricing. Kaplan Higher Education (KHE)KNA competes with companies that provide various education technology solutions, consumer test and licensure preparation and course delivery, corporate training, university administrative support for online programs and courses, curriculum development, overall online program development and analytics for colleges and universities, as well as support for corporate, employer and employee education programs.Theprograms. The market for KHEKNA’s services and products, and especially its higher education services and products, is dynamic and rapidly evolving, and several competitors offer a mix of some of the same products and services or seekare seeking to move into KHE’s markets.the markets in which KNA operates. Competitive factors in KHE’sthese KNA markets include the ability to deliver a wide range
16


of educational services and programs to clients across all levels of programs and administrative functions; cost effectiveness; expertise in marketing, recruitment and program delivery; student outcomes and satisfaction; the ability to invest in start-up and scaling initiatives; reputation; and compliance with laws and the ability to navigate complex regulatory requirements. KHE’sKNA’s ability to effectively compete in the higher education services markets will depend in large part on its successful delivery and navigation of these factors.factors. While the competitive landscape is expanding, KHE’sKNA’s resources, capabilities and experience are key differentiators in the market. Kaplan Test Preparation (KTP) competesSimilarly, KNA’s supplemental education products and services compete with a wide range of national, regional, local, online and location-based competitors. Competitors vary by test, with many competitors focused on preparing students for a single high-stakes test. For its curricular and assessment services, KTPKNA has a number of national competitors including,as well as competitors focused on preparation for example, ATI/Ascend Learning and HESI/Elsevier.particular tests. Competitive factors for the supplemental education products vary by product line and include price, features, modality, schedule and reputation. Although KTPKNA faces intense competition and shifting consumer preferences in these areas, particularly with respect to online test prep, KTPpreparation, where some new competitors are offering lower-cost and free test preparation products, KNA, and particularly Kaplan Test Prep, remains a leading name in test prep due,preparation owing in part to its technical expertise and capabilities, quality of instructors, content, curricula, longevity and curricula and longevityreputation in the industry. Kaplan Professional (U.S.) (KP) offersKNA’s professional licensure training and preparation and corporate training products and services offer a broad portfolio of products, many within highly regulated and mature industries, including securities, insurance, real estate and wealth management, where competition includes a wide variety of national, regional and local companies seeking the same market share and resulting in deep price discounting and commoditization of offerings.
Graham Media Group
GMG competes for audiences and advertising revenues with television and radio stations, cable systems, and video services offered by telephone and broadband companies serving the same or nearby areas; withareas, DBS services;services, digital media services, and, to a lesser degree, with other media providers, such as newspapers and magazines. Cable systems operate in substantially all of the areas served by the Company’s television stations, where they compete for television viewers by importing out-of-market television signals; by distributing pay-cable, advertiser-supported and other programming that is originated for cable systems; and by offering movies and other programming on aan on-demand, digital or pay-per-view basis. In addition, DBS services provide nationwide distribution of television programming, including pay-per-view programming and programming packages unique to DBS, using digital transmission technologies. Moreover, to the extent that competing television stations in theCompany’s television markets transition to ATSC 3.0, such stations may pose an increased competitive challenge to the Company’s stations in the future, such as by offering an increased number of multicast channels and/or by offering advanced features.
Competition also continues to increase from established and emerging online distribution platforms. Movies and television programming increasingly are available on an on-demand basis through a variety of online platforms, which include free access on the websites of the major TV networks, ad-supported viewing on platforms such as Hulu, and subscription-based access through services such as Netflix. In addition, online-only subscription services offering live television services have been launched both by traditional pay-TV competitors (such as DISH and DirecTV) and newnewer entrants (such as Sony)Fubo). The Company has entered into agreements for some of its stations to be distributed via certain of these services, typically through opt-in agreements negotiated by the stations’ affiliated networks. Participation in these services has given the Company’s stations access to new distribution platforms. At the same time, competitionfrom these various platforms could adversely affect the viewership of the Company’s


television stations via traditional platforms and/or the Company’s strategic position in negotiations with pay-TV services. In addition, the networks’ increased role in negotiating online distribution arrangements for their affiliated stations, together with the networks’ imposition of higher fees on affiliated stations in exchange for broadcast and traditional pay-TV retransmission rights,may have broader effects on the overall network-affiliate relationship, which the Company cannot predict.
Hoover
Hoover’s predominant product line is fire-retardant treated wood products for building interior applications that are specified by architects in accordance with building code requirements for multi-family residential, commercial and institutional nonresidential buildings. Hoover’s fire-retardant product lines are sold through a stocking distributor network of more than 100 locations spanning the U.S. and Canada. Hoover’s competitors are licensees of other chemical suppliers to the wood treating industry who compete with Hoover’s stocking distributors on a local basis. The primary areas of competition are product availability and price, although brand loyalty due to product quality is significant. Wood products are commodities with volatile market pricing; however, Hoover’s reputation for quality products and its unique distribution model, which provides superior product availability, enable Hoover to maintain a leading position across the continent.
17


Dekko
Dekko has three distinct product families that compete in fragmented, competitive global markets: power and data distribution for office and furniture products;products, lighting solutions;solutions, and electrical harness manufacturing. These products are sold through dealer and distribution channels and OEM customers—original equipment manufacturer (OEM) customers, focused primarily on the North American market. While all markets and products are price sensitive, technology, engineering solutions, quality and delivery performance are critical in purchase decisions. Dekko’s multiple long-term relationships, high-quality manufacturing facilities, engineering support and reputation as a solutions provider, in addition to being a product supplier, all contribute to sustaining its competitive advantages.
Graham Healthcare Group
The home health and hospice industries are extremely competitive and fragmented, consisting of both for-profit and non-profitnonprofit companies. According to the Medicare Payment Advisory Commission’s March 2018 report,July 2021 Data Book, there are approximately 12,00011,456 Medicare-certified home health providers and approximately 4,5004,840 hospice providers in the United States.U.S., with the number of active home healthcare providers rapidly increasing. GHG markets its services to physicians, discharge planners and social workers at hospitals, nursing homes, senior living communities and physicianphysicians’ offices through a direct sales model. GHG differentiates its offeringofferings based on response time, clinical programming, clinical outcomes and patient satisfaction. Throughout the three states in which it operates, GHG competes primarily with both privately owned and hospital-operated home health and hospice service providers.
SocialCodeGraham Automotive
The retail automotive industry is highly competitive and fragmented. Automobile dealerships compete with dealerships offering the same brands as well as those offering other manufacturers’ brands. Competitors include small local dealerships and large national multi-franchise automotive dealership groups. In addition to competition for vehicle sales, dealerships compete for parts and service business with other dealerships, automotive parts retailers and independent mechanics. The principal competitive factors in vehicle sales are price, selection of vehicles, location of dealerships and quality of customer service. The principal competitive factors in parts and service sales are price, the use of factory-approved replacement parts, factory-trained technicians and the quality of customer service.
Leaf
Leaf operates in highly competitive and developing industries that are characterized by rapid technological change, a variety of business models and frequent disruption of incumbents by innovative entrants. Its art and design marketplaces, Society6 Group and Saatchi Art Group, compete with a wide variety of online and brick-and-mortar companies selling comparable products. Its made-to-order marketplace business, Society6 Group, primarily competes with companies that also utilize a made-to-order business model whereby consumer products featuring artist designs are produced by third-party fulfillment partners and shipped directly to customers, such as Redbubble, Zazzle, Art.com, Shutterfly and Minted, as well as companies that offer broader home décor and apparel products, such as Amazon, Etsy, Wayfair, Urban Outfitters and West Elm. Its online art gallery and in-person art fair business, Saatchi Art Group, competes with traditional offline art galleries, art consultants and online platforms selling original artwork, such as Artfinder, Artspace, Rise Art, Singulart, eBay and Amazon Art, as well as various art fairs that feature reasonably priced artwork from emerging artists, such as The Affordable Art Fair. Leaf’s marketplaces must successfully attract, retain and engage both buyers and sellers to use our platforms and attend our fairs. The principal competitive factors for such marketplaces include the quality, price and uniqueness of the products, artwork or services being offered; the selection of goods and artists featured; the ability to source numerous products efficiently and cost-effectively with respect to its made-to-order products; customer service; the convenience and ease of the shopping experience; and its reputation and brand strength. Competition is expected to continue to intensify as online and offline businesses increasingly compete with each other and the barriers to enter online channels are reduced. For properties within its Media Group, Leaf faces intense competition from a wide range of competitors. These markets are rapidly evolving, highly fragmented and competition could increase in the future as more companies enter the space. The Media Group competes for advertisers on the basis of a number of factors, including return on marketing expenditures, price of our offerings, and the ability to deliver large audiences or precise types of segmented audiences. Principal competitors in this space currently include various online media companies ranging from large internet media companies to specialized and enthusiast properties that focus on particular areas of consumer interest, as well as social media outlets such as Facebook, TikTok, Snapchat, Instagram and Pinterest, where brands and advertisers are focusing a significant portion of their online advertising spend in order to connect with their customers. Some of its competitors have larger audiences and more financial resources and many of its competitors are making significant investments in order to compete with various aspects of this business. Many of Leaf’s current competitors have, and potential competitors may have, substantially greater financial, marketing and other resources than Leaf; greater technical capabilities; greater brand recognition; longer operating histories; differentiated products and services; and larger customer bases. These resources may help some of these competitors and potential competitors respond more quickly as the industry and technology evolves,
18


focus more on product innovation, adopt more aggressive pricing policies and devote substantially more resources to website and system development.
Clyde’s
The restaurant industry is highly competitive. Clyde’s competes with national and regional chains and independent, locally owned restaurants for customers and personnel. The principal basis for competition are types of food and service, quality, price, location, brand and attractiveness of facilities.
Framebridge
Framebridge operates in a highly fragmented market. Competitors include small local retail operations and a few national retail chains. The competitive factors in the framing industry are price, selection and convenience. Framebridge’s centralized manufacturing, clear and transparent pricing, retail stores that are optimized for foot traffic and a curated buying experience rather than framing workshops, and strong e-commerce and digital capabilities contribute to its competitive advantages.
Code3
The business of managed digital advertising is highly competitive. Public multinational advertising agencies may exacerbate price competition in an attempt to protect existing relationships with advertising clients in traditional media formats such as television. Public and private advertising technology companies, digital media agencies and newer market entrants such as consulting firms also compete on price, service and technology offerings. SocialCodeCode3 seeks to maintain a competitive advantage and maximize its clients’ return on advertising budgets by utilizing a combination of the deep expertise of its employees, who manage media spending on the largest digital platforms; a proprietary software (SaaS) as a service platform, allowing clients to make better use of first-party and third-party data to increase advertising effectiveness;platforms and a full-servicefull-service creative team with a nuanced understanding of digital media.
PanoplyDecile
Panoply provides podcast technology for publishersDecile faces competition from lower-cost providers that provide a narrower data analytics offering. In addition, at higher price points aimed at larger marketers ($50M+ annual revenue), there are several large customer data platform (CDP) competitors that attempt to unify many disparate sources of data to improve omnichannel advertising outcomes. Decile seeks to maintain a competitive advantage by simplifying the connection between data and advertisers throughmarketing and bridging the Megaphone platformgap between financial and Megaphone Targeted Marketplace (MTM). Megaphone,marketing analytics to help marketers extract the most value out of their customer and sales data, all at a proprietary SaaS platform, provides hostingcompetitive price. Decile’s additional third-party data enrichment capabilities and dynamic advertising insertion for publishers. Megaphonedata science analytics serve as key differentiators in the mid-market space where those capabilities are not available at a competitive price.
Slate
As a digital media company, Slate operates in highly competitive markets for subscribers, audiences and advertisers. For written work, Slate faces competition from other online publishers, especially magazines and newspapers. In podcasting, Slate faces competition from other podcast networks, as well as traditional radio networks. In the face of stiff competition, Slate is able to attract and retain a small but competitive marketlarge educated, affluent audience and competes primarily on the basis of product performance, price and service. Megaphone’s differentiators include an intuitive user experience, dynamic advertising insertion, advertising operations tools, customer service and proprietary audience-targeting technology. MTM operates in the nascent market for targeted advertising in podcastingsubscriber base by creating high-quality content, and is the pioneer of this technology. MTM’s proprietary dynamic advertising insertion technology combined with data from the Nielsen Marketing Cloud platform allows brandthen able to compete for advertisers who wish to target more than 60,000 segments basedreach that audience on demographics, interests, behavioral traits and purchase intent.


trusted, brand-safe properties.
Pinna
Pinna is currently the only ad-free, audio on-demand streaming service designed just for children that offers multiple audio formats in one space that complies with the Children’s Online Privacy Protection Act (COPPA). The market for children’s subscription digital media entertainment is large. It includes media subscription services for families, subscription services for children, online learning/gaming destinations, audiobooks and podcasts for children, gaming subscriptions and free digital content. Key differentiators for Pinna include its access to multiple formats and its offering of curated best-in-class brands and original shows all in one ad-free COPPA compliant-place.COPPA-compliant place.
Executive OfficersEXECUTIVE OFFICERS
The executive officers of the Company, each of whom is elected annually by the Board of Directors, are as follows:
Donald E. Graham, age 73,76, has been Chairman of the Board of the Company since September 1993 and served as Chief Executive Officer of the Company from May 1991 until November 2015. Mr. Graham served as President of the Company from May 1991 until September 1993 and prior to that had been a Vice President of the Company for more than five years. Mr. Graham also served as Publisher of The Washington Post (thePost)from 1979 until September 2000 and as Chairman of thePostfrom September 2000 to February 2008.
19


Timothy J. O’Shaughnessy, age 37,40, became Chief Executive Officer of the Company in November 2015. From November 2014 until November 2015, he served as President of the Company. He was elected to the Board of Directors in November 2014. From 2007 to August 2014, Mr. O’Shaughnessy served as chief executive officer of LivingSocial, an e-commerce and marketing company that he co-founded in 2007. Mr. O’Shaughnessy is the son-in-law of Donald E. Graham, Chairman of the Company.
Andrew S. Rosen, age 58,61, became Executive Vice President of the Company in April 2014. He became Chairman of Kaplan, Inc. in November 2008 and served as Chief Executive Officer of Kaplan, Inc. from November 2008 to April 2014 and from August 2015 to the present. Mr. Rosen has spent nearly 3336 years at the Company and its affiliates. He joined the Company in 1986 as a staff attorney with the Post and later served as assistant counsel at Newsweek. He moved to Kaplan in 1992 and held numerous leadership positions there before being named Chairman and Chief Executive Officer of Kaplan, Inc.
Wallace R. Cooney, age 56,59, became Senior Vice President–Finance and Chief Financial Officer of the Company in April 2017. Mr. Cooney served as the Company’s Vice President–Finance and Chief Accounting Officer since 2008.from 2008 to 2017. He joined the Company in 2001 as Controller.
Marcel A. Snyman,Jacob M. Maas, age 44,45, became Executive Vice President and Chief Accounting Officer of the Company onin January 18, 2018. Mr. Snyman served as Controller of the Company since January 2016,2022, prior to which he served as Assistant Controller beginning in April 2014 and Director of Accounting Policy beginning in July 2008.
Denise Demeter, age 58, became Vice President–Chief Human Resources Officer of the Company in September 2014. Ms. Demeter joined the Company in 1986 and has served in a variety of roles, including Vice President–Human Resources and Senior Director–Pension & Savings Plans.
Jacob M. Maas, age 42, became Senior Vice President–Planning and Development of the Company inbeginning October 2015. Prior to joining the Company, he served as executive vice president of operations and head of corporate development at LivingSocial, an e-commerce and marketing company that he joined as chief financial officer in 2008.
Nicole M. Maddrey, age 54,57, became Senior Vice President, General Counsel and Secretary of the Company in April 2015. Ms. Maddrey joined the Company in 2007 as Associate General Counsel. Prior to joining the Company, Ms. Maddrey served as Special Counsel in the Division of Corporation Finance at the U.S. Securities and Exchange Commission.
Marcel A. Snyman, age 47, became Vice President and Chief Accounting Officer of the Company in January 2018. Mr. Snyman served as Controller of the Company from 2016 to 2018, prior to which he served as Assistant Controller beginning in April 2014 and Director of Accounting Policy beginning in July 2008.
EmployeesSandra M. Stonesifer, age 37, became Vice President–Chief Human Resources Officer of the Company in January 2021. Prior to joining the Company, Ms. Stonesifer was a consultant with S-Squared Consulting, an organization development consulting company.
HUMAN CAPITAL
The Company employs approximately 18,000 people worldwide, of which approximately 12,350 were employed in the United States and its subsidiaries employ approximately 11,1005,650 were employed outside the United States. Employment across each of the Company’s businesses is further discussed below.
Kaplan employs approximately 6,100 people on a full-time basis.
Worldwide, Kaplan employs approximately 6,200 people on a full-time basis.basis in 27 countries. Kaplan also employs substantial numbers of part-time employees who serve in instructional and administrative capacities. Kaplan’s part-time workforce comprises approximately 6,500 individuals.4,000 individuals in 17 countries. Collectively, in the U.S., U.K. and Canada, 7152 Kaplan employees are represented by a union. In countries where Kaplan believes there are represented employees in the United Kingdom and Australia, wherehas a presence but union membership is not disclosed to the employer.employer – the U.K., Australia and Singapore – there may be union represented employees as well.
GMGGraham Media Group has approximately 9671,012 employees, including 968 full-time employees and 44 part-time employees, of whom approximately 105 are represented by a union.
In the Manufacturing segment, Hoover has approximately 356 full-time employees, of whom about 9215 are represented by a union. Of the six collective-bargaining agreements covering union-represented employees, all are currently under contract. One collective-bargaining agreement will expire in 2019.


Slateunion, and one part-time employee. Dekko has approximately 123 full-time employees. In January 2018, employees of Slate voted to elect the Writers Guild of America East (WGAE) to serve as their representative. As a result, 52 eligible Slate editorial employees are represented by the WGAE for purposes of collective bargaining.
Panoply has approximately 57 full-time employees. None of Panoply’s employees is represented by a union.
Pinna currently employs 121,185 full-time employees, none of whom is represented by a union.
GHG Joyce/Dayton has approximately 1,142165 full-time employees, none of whom is represented by a union. Forney has approximately 109 full-time employees, of whom 43 are represented by a union.
In the Healthcare segment, Graham Healthcare Group has approximately 1,159 full-time employees and 243 part-time employees. None of these employees is represented by a union.
Graham Automotive employs approximately 412 full-time employees. None of these employees is represented by a union.
Forney has approximately 140 full-time employees, of whom 55 are represented by a union.
Joyce/Dayton has approximately 147In the Other Businesses segment, Leaf Group employs 390 full-time employees, none of whom is represented by a union.
SocialCode Clyde’s has approximately 300148 full-time employees and 1,342 part-time employees, none of whom is represented by a union. Framebridge has approximately 782 employees, including 243 seasonal employees, none of whom is represented by a union. Code3 has approximately 236 full-time employees, none of whom is
20


represented by a union. Decile has 34 full-time employees and two part-time employees, none of whom is represented by a union. Slate employs 123 full-time employees and seven part-time employees, of whom approximately 57 are represented by a union. Pinna employs 10 full-time employees, none of whom is represented by a union.
Dekko The FP Group has approximately 1,45756 full-time employees and four part-time employees. CyberVista employs 37 full-time employees and 11 part-time employees, none of whom is represented by a union.
Hoover has approximately 379 full-time employees, of whom 27 are represented by a union.
The FP Group and CyberVista each employs fewer than 50 people. Approximately 10 FP Group employees are represented by a union.
The parent Company has approximately 7372 full-time employees and one part-time employee, none of whom is represented by a union.
The Company recognizes the importance of attracting, developing and retaining highly qualified employees throughout each of its businesses. The following is a description of the Company’s efforts to manage and promote human capital within its organization.
Forward-Looking StatementsOversight and Management. The Company’s human resources organization and the human resource organizations of its various businesses manage employment-related matters, including recruiting and hiring, training, compensation, workplace safety, performance management, support for specific needs including supporting employees who are caregivers or working remotely, and creating diversity, equity and inclusion strategies. The Compensation Committee of the Board of Directors provides oversight of certain human capital matters, including compensation and benefits, executive development, workforce diversity and inclusion initiatives, and succession planning.
Compensation and Benefits. The Company offers strong compensation and benefits programs to its employees. In 2021 the Company utilized a market pay tool to ensure all our units have access to high-quality market compensation data that enables them to set fair and equitable compensation rates. Depending on the business unit, employee benefits may include healthcare and insurance benefits, health savings and flexible spending accounts, paid time off, family leave, employee assistance programs, tuition assistance programs, bonuses, long-term incentive compensation plans, pension and a 401(k) Plan. The Company also offers a small group of eligible employees certain equity-based grants under the Company’s incentive compensation plan with vesting and performance conditions to facilitate the attraction, retention, motivation and reward of key employees and to align their interests with those of the Company’s stockholders.
Health and Safety. The health and safety of the Company’s employees is paramount. The Company’s health and safety programs are designed to address multiple jurisdictions and regulations as well as the specific risks and unique working environments of each of the Company’s businesses. In response to the COVID-19 pandemic, the Company’s businesses have adopted return to office and vaccination policies and procedures that are most appropriate for their businesses based on their industry and health risks as well as federal, state and local guidance and regulation. At this time the majority of our workforce is required to be vaccinated against COVID-19 for in-person work.
Training and Talent Development. The Company is committed to the continued growth and development of its employees across all businesses. While development opportunities vary across the Company’s businesses, the Company seeks to offer a variety of learning opportunities including virtual learning as well as on-the-job mentoring and coaching. All employees complete core harassment and discrimination training and ethics training and are offered specific skills training designed to support the growth and advancement of their professional skills. For example, CyberVista conducts web-based leadership management training for first-time managers. Leaf Group has deployed several continuous learning platforms, including a diversity and inclusion learning platform; an eLearning and development platform; and a performance management platform. Leaf Group’s leadership development program includes personal assessments and one-on-one coaching for senior leadership. Joyce/Dayton conducted leadership assessments for executives and managers as well as a personal assessment tool to improve organizational communication. GMG has established learning and development opportunities to support its mission to be the authentic, local voice in the communities they serve. GMG proudly offers in-house leadership programs such as ‘Boss School’ which focuses on key skills and knowledge for new managers and a continuing development program for experienced producers.
Diversity and Inclusion. Diversity and inclusion remains a high priority within the Company and in 2021 several new initiatives were launched at both the corporate level and at our business units. These initiatives are focused on supporting the retention and training of a diverse workforce across the Company. The Company encourages all business units to promote policies prioritizing diversity, equity and inclusion (DEI), and offers courses on inclusive leadership and unconscious bias as part of Company-wide training options. In 2021, the Company chose to focus its global efforts on learning and strategy-building. The Company’s business units participated in a corporate-funded training program to establish DEI goals focused on attracting, retaining, developing and engaging underrepresented talent. The outcomes of the exercise were reported to the Board in November 2021. Following the completion of the program, a GHC Diversity, Equity and Inclusion Council was formed to support ongoing progress at each individual business and collectively across the Company.
21


The Company is committed to a culture in which its diverse employee base can thrive in an inclusive and respectful environment. As of December 2021, the diversity of the Company’s employees in the U.S. was: 54% female; 46% male; 63% White; 14% Black or African American; 14% Hispanic or Latino; 7% Asian; and 2% Other.
The Company’s businesses have launched various initiatives to support their individual DEI efforts. For example, GMG launched a strategy that included the adoption of new training tools, the creation of employee resource groups, virtual employee learning activities around Juneteenth and other celebration events, and talent sourcing focused on attracting underrepresented talent. At Kaplan, they have prioritized educating managers and employees on DEI best practices and expectations, including creation of a Global Inclusive Leader and Inclusive Colleague training for all current and new employees. Kaplan also sponsors diversity appreciation months that include social activities and discussion forums around relevant topics that raise awareness and increase understanding of diversity. Kaplan continues to be the primary donor and supporter of The Kaplan Educational Foundation (KEF), an independent public charity founded by Kaplan executives to help promote racial equality through higher education. Other business units have established strategic diversity and inclusion initiatives in ways that speak to their unique environment and human capital needs. For example, GHG has committed to building a career pathing and mentorship program for all field-based positions to help employees, especially underrepresented talent, achieve their career advancement goals. Most of the Company’s businesses have incorporated diversity, equity and inclusion related questions in their engagement surveys and are beginning to gather and analyze their human capital data to better understand existing conditions, set goals, and measure progress moving forward.
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 Annual Report on Form 10-K and elsewhere in the Company’s 20182021 Annual Report to Stockholders, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include comments about expectations related 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 this 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.
Available InformationAVAILABLE INFORMATION
The Company’s Internetinternet address iswww.ghco.com.The Company makes available free of charge through its website its Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, definitive proxy statements on Schedule 14A and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (Exchange Act) as soon as reasonably practicable after such documents are electronically filed with the Securities and Exchange Commission (SEC). In addition, the Company’s Certificate of Incorporation, its Corporate Governance Guidelines, the Charters of the Audit and Compensation Committees of the Company’s Board of Directors and the codes of conduct adopted by the Company and referred to in Item 10 of this Annual Report on Form 10-K are all available on the Company’s website; printed copies of such documents may be obtained by any stockholder upon written request to the Secretary, Graham Holdings Company at 1300 North 17th Street, Arlington, VA 22209. The contents of the Company’s website are not incorporated by reference into this Form 10-K and shall not be deemed “filed” under the Exchange Act.
The SEC website, www.sec.gov, contains the reports, proxy statements and information statements and other information regarding issuers that file electronically with the SEC.
22


Item 1A. Risk Factors.
SUMMARY RISK FACTORS
This risk factor summary does not contain all of the information that may be important to you, and you should read this risk factor summary together with the more detailed discussion of risks and uncertainties set forth following this section under the heading “Risk Factors,” as well as elsewhere in this Annual Report on Form 10-K. Additional risks, beyond those summarized below or discussed elsewhere in this Annual Report on Form 10-K, may apply to the Company’s business, activities or operations as currently conducted or as may be conducted in the future. These risks include, but are not limited to, the following:
Risks Related to the COVID-19 Pandemic
•    The Company’s Business, Results of Operations and Cash Flows Have Been and Will Continue to Be Adversely Impacted by the Effects of the COVID-19 Pandemic.
Risks Related to the Company’s Education Business
•     Changes in International Regulations, Travel Restrictions and Sanctions.
•     Difficulties of Managing Foreign Operations and Failure to Comply with Foreign Regulatory Requirements.
•     Changes in U.K. Tax Laws.
•     Failure to Comply with Statutory and Regulatory Requirements as a Third-Party Servicer to Title IV Participating Institutions.
•     Failure to Comply with the ED’s Title IV Incentive Compensation Rule.
•     Failure to Comply with the ED’s Title IV Misrepresentation Regulations.
•     Compliance Reviews, Program Reviews, Audits and Investigations, Including in Connection with Borrower Defense to Repayment Claims.
•     Noncompliance with Regulations by KNA’s Client Institutions.
•     Kaplan May Fail to Realize the Anticipated Benefits of the Purdue Global Transaction.
•    Regulatory Changes and Developments.
•     Changes in the Extent to Which Standardized Tests Are Used in the Admissions Process by Colleges or Graduate Schools and Increased Competition.
•     Postponement and Cancellation of Examinations and Changes in the Extent to Which Licensing and Proficiency Examinations Are Used to Qualify Individuals to Pursue Certain Careers.
•    Liability under Real Estate Lease Guarantees for Certain Real Estate Leases that were Assigned to Education Corporation of America.
Risks Related to the Company’s Television Broadcasting and Media Businesses
•     Changing Perceptions about the Effectiveness of Television Broadcasting in Delivering Advertising.
•     Increased Competition Resulting from Technological Innovations in News, Information and Video Programming Distribution Systems and Changing Consumer Behavior.
•    Changes in the Nature and Extent of Government Regulations.
•    Transition to New Technical Standards for Broadcast Television Stations.
•     Potential Liability for Intellectual Property Infringement.
23


Risks Related to the Company’s Manufacturing Businesses
•    Failure to Comply with Environmental, Health, Safety and Other Laws Applicable to the Company’s Manufacturing Operations.
•     The Company May Be Subject to Liability Claims.
•     Failure to Recruit and Retain Production Staff Needed to Meet Customer Demand.
Risks Related to the Company’s Healthcare Business
•     Extensive Regulation of the Healthcare Industry.
Continued Nursing Staffing Shortages.
Risks Related to the Company’s Automotive Businesses
•    Termination or Non-renewal of a Dealership Agreement by an Automobile Manufacturer and Limitations on the Company’s Ability to Acquire Additional Dealerships.
•    Changes Affecting Automobile Manufacturers.
•    Changes to State Dealer Franchise Laws to Permit Manufacturers to Enter the Retail Market Directly and Technological Innovations.
•    Changes in a Manufacturer’s Incentive Programs.
Changes in Environmental Regulations Governing the Operations of the Automotive Business.
Changes in Economic Conditions and Vehicle Inventories.
Risks Related to the Company’s Other Businesses
•    Failure to Successfully Drive Traffic to Leaf’s Marketplaces and Media Properties and Expand its Customer Base for its Marketplaces.
•    Failure to Effectively Distribute Leaf’s Media Content on Social Media Platforms or Effectively Optimize its Mobile Solutions in Order to Improve User Experience or Comply with Requirements of Leaf’s Advertising Partners.
•    Leaf’s Businesses Face Significant Competition.
•    Failure to Recruit and Retain Employees in the Company’s Restaurants.
•    Food-Borne Illness Concerns and Damage to the Company’s Reputation.
•    Concentration of the Company’s Restaurants in the Washington, D.C. Region.
Risks Related to Cybersecurity, Information Technology and Data Management
•     System Disruptions and Security Threats to the Company’s Information Technology Infrastructure.
•     Failure to Comply with Privacy Laws or Regulations.
Financial Risks
•     Failure to Successfully Integrate Acquired Businesses.
•     Changes in Business Conditions.
RISK FACTORS
The Company faces a number of significant risks and uncertainties in connection with its operations. TheDescribed below are the most significant of these are described below.material risks faced by the Company. These risks and uncertainties may not be the only ones facingfaced by the Company. Additional risks and uncertainties not presently known, or currently deemed immaterial, may adversely affect the Company in the future. In addition to the other information included in this Annual Report on Form 10-K, investors should carefully consider the following risk factors. If any of the events or developments described below occurs, it could have a material adverse effect on the Company’s business, financial condition or results of operations.

24



Risks Related to the COVID-19 Pandemic
•    The Company’s Business, Results of Operations and Cash Flows Have Been and Will Continue to Be Adversely Impacted by the Effects of the COVID-19 Pandemic, the Significance of Which Will Depend on the Longevity and Severity of the Pandemic.
The COVID-19 pandemic and measures taken to prevent its spread, such as travel restrictions, shelter in place orders and mandatory closures, have materially affected the Company’s businesses, including the demand for its products and services. Travel restrictions and school closures have impeded and will continue to impede the ability of students to travel to undertake overseas study or to accept a place or remain in their student halls of residence as long as they remain in place, and have reduced student applications for programs offered by Kaplan International’s (KI) operations and halls of residence, including Kaplan Languages Group, KI Pathways, Kaplan Australia, Kaplan Singapore, MPW and certain KNA preparation programs that recruit foreign students. Instruction moving online reduced demand for halls of residence for international students and where such demand continued to exist in the first half of 2021, students sought discounts for periods they had not been able to stay in their accommodations due to COVID-19 travel restrictions. Further lockdowns or other measures in response to COVID-19 variants could negatively affect demand for housing and may result in residents again seeking discounts for periods they had not been able to stay in their accommodations. Travel restrictions, decreased enrollments and delays and cancellations of standardized tests have, and are expected to continue to, materially adversely affect the Company’s revenues, operating results and cash flows. Manufacturing restrictions, including plant closures and disruptions in the Company’s supply chains, declines in demand for products and advertising, restaurant and live art fair closures, competition for labor and COVID-19 absenteeism, and other developments related to the COVID-19 pandemic have also adversely impacted the Company’s media, manufacturing, healthcare, automotive and other businesses. For example, at certain periods during the pandemic, the Company had to temporarily close all of its restaurants and entertainment venues pursuant to government orders, before later obtaining permission to resume indoor dining services. The long-term impact of the pandemic on public demand for crowded dining facilities cannot be predicted. Moreover, the Company cannot predict the duration or scope of the COVID-19 pandemic and what actions will be taken by governmental authorities and other third parties in response to the pandemic and new variants. On January 13, 2022, the U.S. Supreme Court blocked the Occupational Safety and Health Administration (OSHA) emergency temporary standard (ETS) requiring all employers with at least 100 employees to mandate vaccination or weekly testing for unvaccinated employees. In a separate decision, the U.S. Supreme Court allowed the federal Centers for Medicare & Medicaid Services (CMS) to enforce a vaccination mandate for healthcare employees at facilities receiving Medicare or Medicaid payments. Additional vaccine mandates may be announced in jurisdictions in which the Company’s businesses operate. Vaccination mandates and other government mandated restrictions, such as density limitations and travel restrictions, may result in employee attrition and difficulty in meeting labor needs. The Company expects the COVID-19 pandemic and related developments to negatively impact its financial results and such impact is expected to be material to the Company’s financial results, operations and cash flows. Additionally, to the extent the COVID-19 pandemic adversely affects the Company’s business operations, financial condition or operating results, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section.
Risks Related to the Company’s Education Business
•    Changes in International Regulations and Travel Restrictions Have Materially Adversely Affected and Together with Changes in Sanctions Could Continue to Materially Adversely Affect International Student Enrollments and Kaplan’s Business.
Kaplan is subject to a wide range of laws and regulations relating to its international operations. These include domestic laws with extraterritorial reach, such as the U.S. Foreign Corrupt Practices Act, international laws, such as the U.K. Bribery Act, as well as the local regulatory regimes of the countries in which Kaplan operates. These laws and regulations change frequently. Failure to comply with these laws and regulations could result in significant penalties or the revocation of Kaplan’s authority to operate in the applicable jurisdiction, each of which could have a material adverse effect on Kaplan’s operating results.
In response to the COVID-19 pandemic, many governments have imposed student travel restrictions (applicable to exit and entry), made recommendations for their students to return home and closed physical campus locations, and many state and professional bodies have postponed or canceled examination dates related to state examinations and professional education programs, all of which have materially adversely affected Kaplan International’s operations and resulted in significant losses at Kaplan Languages Group. The emergence of new variants of COVID-19, and consequential changes to travel and study arrangements could further negatively affect Kaplan International and its operating results. Further changes to the regulatory environment, including changes to government policy or practice in oversight and enforcement, or other factors, including geopolitical instability, imposition or extension of international sanctions, a natural disaster or pandemic in either the students’ countries of origin or countries in which they desire to study, could continue to negatively affect Kaplan’s ability to attract and
25


retain students and negatively affect Kaplan’s operating results. Additionally, increasingly, governments have begun imposing sales taxes on digital services, such as education, offered in their jurisdictions by foreign providers. Any significant changes to availability of government funding for education, visa policies or other administrative immigration requirements, or the tax environment, including changes to tax laws, policies and practices, in any one or more countries in which KI operates or makes its services available could negatively affect its operating results.
KI’s operations, institutions and programs in the U.S. may be subject to state-level regulation and oversight by state regulatory agencies, whose approval or exemption from approval is necessary to allow an institution to operate in the state. These agencies may establish standards for instruction, qualifications of faculty, location and nature of facilities, financial policies and responsibility and other operational matters. Institutions that seek to admit international students are required to be federally certified and legally authorized to operate in the state in which the institution is physically located in order to be allowed to issue the relevant documentation to permit international students to obtain a visa.
A substantial portion of KI’s revenue comes from programs that prepare international students to study and travel in English-speaking countries. In 2021, university preparation programs were principally delivered in Australia, Singapore and the U.K. KI’s ability to enroll students in these programs is directly dependent on its ability to comply with complex regulatory environments. For example, the impact of Brexit on KI over time will depend on the agreed terms of the U.K.’s withdrawal from the EU. Uncertainty over the impact and terms of Brexit trade deals may materially diminish interest in traveling to the U.K. for study. If the U.K. is no longer viewed as a favorable study destination, KI’s ability to recruit international students would be adversely impacted, which would materially adversely affect KI’s results of operations and cash flows.
Revised U.K. immigration rules became effective on January 1, 2021, as the Brexit transition was completed. Effective January 1, 2021, all international students, including EEA and Swiss students studying in the U.K. for more than six months, are included in the Student Route, unless they are undertaking an English language course under a Short-Term Study visa of up to 11 months. Free movement ceased between the EEA (together with Switzerland) and the U.K.; students from these countries entering the U.K. are now subject to the same U.K. immigration rules as students from outside the EEA and Switzerland. EEA and Swiss nationals commencing a higher education course in England from August 2021 will no longer qualify for home fee status or have access to financial support from Student Finance England. It is unclear how international student recruitment agents and prospective international students may view the U.K. as a study destination after the introduction of any new immigration requirements and the U.K.’s exit from the EU. The introduction of revised immigration rules has historically increased, and may continue to increase, KI’s operating costs in the U.K. The introduction of new visa and other administrative requirements for entry into the U.K., Brexit and the perception of the U.K. as a less favorable study destination may have a materially adverse impact on KI’s ability to recruit international students and KI’s results of operations and cash flows.
Changes to levels of direct and indirect government funding for international education programs would also materially affect the success of KI’s operations. For example, if access to student loans or other funding were to be lost for KI operations that admit students who are entitled to receive the benefit of this funding, Kaplan’s operating results could be materially adversely affected.
In January 2021, President Biden reversed a previously enacted ban on travel from certain counties to the U.S. and directed the State Department to restart visa processing for individuals from the affected countries. There have since been new, unrelated travel restrictions into the U.S. due to COVID-19, and those restrictions can be expected to continue changing. On September 25, 2020, the previous U.S. presidential administration proposed significant changes to the visa rules governing entry of non-immigrant academic students and exchange visitors. In July 2021, the Biden administration formally withdrew the notice of proposed rulemaking regarding these changes. Nevertheless, negative perceptions regarding travel to the U.S. could continue to have a significant negative impact on KI’s ability to recruit international students, and Kaplan’s business could be adversely and materially affected. In 2018, the Australian government introduced legislation that requires higher-level education standards, a compulsory national exam and increased continuing professional development requirements for all financial advisers in Australia. It had been expected that the new requirements could result in financial advisers leaving the industry, which would have resulted in a loss of those existing students for Kaplan Professional Australia. Although advisers did leave the industry, the market leading position of Kaplan Professional meant that its student numbers actually increased. In 2021, the numbers of advisers pursuing compulsory education upgrades slowed as advisers focused on completing the national exam requirement before a year-end deadline. As predicted, there has been a loss of existing advisers as a result of their unwillingness to meet the new standards. Although Kaplan Professional was able to increase its market share due, in part, to the increased annual continuing education development requirements, the legislation has had a negative impact on results of operations.
26


•    Difficulties of Managing Foreign Operations and Failure to Comply Withwith Foreign Regulatory Requirements Have Negatively Impacted and Could Continue to Negatively Affect Kaplan’s Business.
Kaplan has operations and investments in a growing number of foreign countries and regions, including Australia, Canada, the People’s Republic of China, Colombia, France, Germany, Hong Kong, India, Ireland, Japan, Myanmar (in which operations are in the process of being closed), New Zealand, Nigeria, Saudi Arabia, Singapore, the U.K. and the United Arab Emirates. Operating in foreign countries and regions presents a number of inherent risks, including the difficulties of complying with unfamiliar laws and regulations, effectively managing and staffing foreign operations, successfully navigating local customs and practices, preparing for potential political and economic instability and adapting to currency exchange rate fluctuations. Failure to effectively manage these risks could have a material adverse effect on Kaplan’s operating results.
In June 2021, the Committee for Private Education (CPE) in Singapore instructed Kaplan Singapore to cease new enrollments for three marketing diploma programs on both a full and part-time basis due to noncompliance with minimum entry level requirements for admission and to teach out existing students in these programs. On August 23, 2021, the CPE issued the same instructions with respect to the Kaplan Foundation diploma and four information technology diploma programs on both a full and part-time basis. In November 2021, the CPE issued the same instructions with respect to a further 23 full-time or part-time diploma programs. Post regulatory action, Kaplan Singapore is currently still able to offer 449 programs that are registered with the CPE, out of which there are 16 diploma programs, 361 bachelors programs, with the balance comprising certificate and postgraduate courses. Kaplan Singapore will apply for re-registration of diploma programs in 2022. The impact from regulatory actions by the CPE will have a significant adverse impact on Kaplan Singapore’s revenues, operating results and cash flows in the future. No assurance can be given that applications for re-registration of the impacted programs will be successful. An inability to re-register one or more impacted programs could have a further material adverse effect on Kaplan Singapore’s revenues, operating results and cash flows.
•    Changes in U.K. Tax Laws Could Have a Material Adverse Effect on Kaplan International.
The UK Pathways Colleges located in England were required to register with the Office for Students (OfS) to ensure they could continue operating as English higher education providers. The UK Pathways Colleges (excluding Glasgow and York) were entered on the OfS register of approved providers with Approved Fee Cap Status in August 2020. These colleges now operate under the regulatory oversight of the OfS. Colleges registered with the OfS under Approved Fee Cap status do not charge students Value Added Tax (VAT) on tuition fees based on a statutory exemption available to Approved Fee Cap providers. The York College forms part of the University of York’s Approved Fee Cap registration. If KI Pathways were to lose its Approved Fee Cap status with the OfS, KI Pathways Colleges’ financial results may be materially adversely impacted.
The Glasgow College is not currently included in the OfS registration as it is located in Scotland. Under a different statutory VAT exemption, bodies which qualify for VAT purposes as “colleges of a university” are able to exempt their tuition fees from VAT, and UK Pathways Glasgow College applies this status. In 2019; a tax case was determined by the U.K. Supreme Court on the meaning of “college of a university.” The U.K. Supreme Court decided the case in the college’s favor. The result was more favorable to private providers working in collaboration with a university. The U.K. Supreme Court emphasized five principal tests for a private provider to meet, for it to be sufficiently integrated with a university, to qualify as a “college of a university” even if it does not have a constitutional link to the university. Although the focus on these five tests has now been incorporated into official Her Majesty's Revenue and Customs (HMRC) guidance, it is not yet clear how HMRC will apply the Supreme Court judgment and the five key tests in practice. If the HMRC’s application of the Supreme Court judgment and the five key tests deems Glasgow International College not to constitute a “college of a university” and not entitled to a VAT exemption, KI Pathways Colleges’ financial results may be materially adversely impacted if they are not able to meet any new requirements.
Following the departure of the U.K. from the EU on December 31, 2020, the U.K. may further develop its VAT rules in this complex area separate from the EU rules. Kaplan is closely monitoring this area.
•    Failure to Comply with Statutory and Regulatory Requirements as a Service ProviderThird-Party Servicer to Title IV Participating Institutions Could Result in Monetary Liabilities or Subject Kaplan to Other Material Adverse Consequences.
KHE is a third-party service providerKNA provides services to Purdue Global, Purdue University and other Title IV participating institutions, including Purdue Global. As a result, KHE is required to comply with certain laws and regulations in connection with the provision of these services. KHEinstitutions. KNA also provides financial aid services to Purdue Global, and as such, KNA meets the definition of a “third-party servicer” for Purdue Global contained in Title IV regulations. By virtue of beingAs a third-party servicer, KHEresult, KNA is also subject to applicable statutory provisions of Title IV and ED regulations that, among other things, require KHEKaplan to be jointly and severally liable with Purdue Globalits Title IV participating client institution(s) to the ED for any violation by Purdue Globalsuch client institution(s) of any Title IV statute or ED regulation or requirement. Separately, if KHEKNA provides financial aid services to more than one Title IV participating institution, it will be required to arrange for an independent auditor to conduct an annual Title IV compliance audit of Kaplan’s KNA’s
27


compliance with applicable ED requirements. KHEKNA is also is subject to other federal and state laws, including but not limited to,federal and state consumer protection laws and rules prohibiting unfair or deceptive marketing practices; data privacy, data protection and information security requirements established by federal, state and foreign governments, including, for example, the Federal Trade Commission, as well as theCommission; and applicable provisions of the Family Educational Rights and Privacy Act regarding the privacy of student records.
Failure to comply with these and other federal and state laws and regulations could result in adverse consequences, including, for example:
The imposition on KHEKaplan of fines, other sanctions or liabilities, including repayment obligations for Title IV funds to the ED or the termination or limitation of Kaplan’s eligibility to provide services as a third-party servicer to Purdue Global or any other Title IV participating institution if KHEKNA fails to comply with statutory or regulatory requirements applicable to such service providers;
Adverse effects on Kaplan’s business and operations from a reduction or loss in KHE’sKNA’s revenues under the TOSA or any other agreement with any Title IV participating institution if a client institution loses or has limits placed on its Title IV eligibility, accreditation, operations or state licensure or is subject to fines, repayment obligations or other adverse actions dueowing to non-compliancenoncompliance by KHEKNA (or the institution) with Title IV, accreditor, federal or state agency requirements;
Liability under the TOSA or any other agreement with any Title IV participating institution for non-compliancenoncompliance with federal, state or accreditation requirements arising from conduct by Kaplan;KNA’s conduct; and
Liability for non-compliancenoncompliance with Title IV or other federal or state requirements occurring prior to the transfer of KU to Purdue.
Although KNA endeavors to comply with all U.S. Federal and state laws and regulations, KNA cannot guarantee that its implementation of the relevant rules will be upheld by the ED or other agencies or upon judicial review. The laws, regulations and other requirements applicable to KNA and its client institutions are subject to change and to interpretation. In addition, there are other factors related to KNA’s client institutions’ compliance with federal, state and accrediting agency requirements, some of which are outside of KNA’s control, that could have a material adverse effect on KNA’s client institutions’ revenues and, in turn, on KNA’s operating results.
•    Failure to Comply Withwith the ED’s Title IV Incentive Compensation Rule Could Subject Kaplan to Liabilities, Sanctions and Fines.
Under the ED’s incentive compensation rule, an institution participating in Title IV programs may not provide any commission, bonus or other incentive payment to any person or entity engaged in any student recruiting or admission activities or in making decisions regarding the awarding of Title IV funds if such payment is based directly or indirectly on success in securing enrollments or financial aid. KHEKNA is a third party providing bundled services to Title IV participating institutions, including recruiting and, in the case of Purdue Global, financial aid services. As such, KHEKNA is also subject to the incentive compensation rulesrule and cannot provide any commission, bonus or other incentive payment to any covered employees, subcontractors or other parties engaged in certain student recruiting, admission or financial aid activities based on success in securing enrollments or financial aid. In addition, Purdue Global’s tuition revenue sharing payments to KHEKNA under the TOSA (as well as any other agreement with any Title IV participating institution) must comply with revenue sharing guidance provided by the ED related to bundled services agreements. KHEIn 2011 guidance, the ED provided that in certain arrangements with Title IV participating institutions where student recruiting services are “bundled” with other non-recruiting services, revenue sharing may be allowable despite the incentive compensation rule’s general prohibition on such revenue sharing with entities or individuals that provide recruiting services. Because this guidance is not codified in any rule or law, but is instead an ED opinion on the applicability of the incentive compensation rule, such guidance can be revoked at any time and without notice. Some lawmakers and states, such as California, have publicly called for the revocation of this guidance or sought to introduce federal and state legislation seeking to prevent any such revenue sharing. The change of control of the executive branch and Congress in 2021 could increase the likelihood of changes to this guidance and to the incentive compensation rule. As previously described, the TOSA revenue sharing fee provisions are defined as deferred purchase price payments rather than payments for services. KNA’s services are paid for as a percentage of KNA’s costs of delivering those services to Purdue Global. KNA cannot predict how the ED or a federal court will interpret, revise or enforce all aspects of the incentive compensation rule or the bundled service revenue sharing guidance in the future or how itthey would be applied to KHE’s agreements.the TOSA or any of KNA’s agreements by the ED or in any litigation. Any revisions or changes in interpretation or enforcement could require KHEKNA and its client institutions to change their practices or renegotiate the tuition revenue sharing payment terms of KHE’sKNA’s agreements with such client institutions and could have a material adverse effect on Kaplan’s business and results of operations. Additionally, failure to comply with the incentive compensation rule could result in litigation or enforcement actions against KHEKNA or its clients and could result in liabilities, fines or other sanctions against KHEKNA or its clients, which could have a material adverse effect on Kaplan’s business and results of operations.
28


•    Failure to Comply Withwith the ED’s Title IV Misrepresentation Regulations Could Subject Kaplan to Liabilities, Sanctions and Fines.
A Title IV participating institution is required to comply with the ED regulations related to misrepresentations and with related federal and state laws. These laws and regulations are broad in scope and may extend to statements by servicers, such as KHE,KNA, that provide marketing or certain other services to such institutions. These laws and regulations may also apply to KHE’sKNA’s employees and agents, with respect to statements addressing the nature of an institution’s programs, financial charges or the employability of its graduates. KHEKNA provides certain marketing and


other services to Title IV participating institutions. The failure to comply with these or other federal and state laws and regulations regarding misrepresentation and marketing practices could result in the imposition on KNA or its client institutions of fines, other sanctions or liabilities, including federal student aid repayment obligations to the ED, the termination or limitation of Kaplan’s eligibility to provide services as a third-party servicer to Title IV participating institutions, the termination or limitation of a client institution’s eligibility to participate in the Title IV programs, or legal action by students or other third parties. A violation of misrepresentation regulations or other federal or state laws and regulations applicable to the services KHEKNA provides to its client institutions arising out of statements by KHE,KNA, its employees or agents could require KHE or its clients to pay fines or other monetary penalties, result in the termination of KHE’s agreements with client institutions or require KHEKNA to pay the costs associated with indemnifying its client institutions from applicable losses. Additionally, failure to comply with theselosses resulting from the violation or other federal and state laws and regulations could result in the imposition on KHEtermination by such client institutions of fines or federal student aid repayment obligations to the ED or the termination or limitation of KHE’s eligibility to providetheir services as a third-party servicer to Purdue Global or any other Title IV participating institution.agreements with KNA.
•    Compliance Reviews, Program Review,Reviews, Audits and Investigations, Including in Connection with Borrower Defense to Repayment Claims, Could Result in Findings of Non- Compliance WithNoncompliance with Statutory and Regulatory Requirements and Result in Liabilities, Sanctions and Fines.
As a third-party servicer providing financial aid services to a Title IV participating institution, KHE isKNA and its client institutions are subject to reviews, audits, investigations and other compliance reviews conducted by various regulatory agencies and auditors, including, among others, the ED, the ED’s Office of the Inspector General, accrediting bodies and state and various other federal agencies. These compliance reviews can result in findings of non-compliancenoncompliance with statutory and regulatory requirements that can, in turn, result in proceedings to imposethe imposition of fines, liabilities, civil or criminal penalties or other sanctions against KHE. KHE will be required,KNA and its client institutions, which could have an adverse effect on Kaplan’s financial results and operations. Separately, if it enters into contracts to provideKNA provides financial aid services to more than one Title IV participating institution, it will be required to arrange for an independent auditor to conduct an annual Title IV compliance audit of KHE’sKNA’s compliance with applicable ED requirements.
On February 23, 2015, the ED began a program review assessing KU’s administration of its KNA’s client institutions are also required to arrange for an independent auditor to conduct an annual Title IV and Higher Education Act programs during the 2013–2014 and 2014–2015 award years. In 2018, Kaplan contributed the institutional assets and operationsaudit of KUtheir compliance with applicable ED requirements, including requirements related to Purdue Global, and the university became Purdue Global, under the ownership and control of Purdue University. However, Kaplan retains liability for any financial obligations the ED might impose under this program review and that are the result of actions taken during the time that Kaplan owned the institution. On September 28, 2018, the ED issued a Preliminary Program Report (Preliminary Report). This Preliminary Report is not final, and the ED may change the findings in the final report. None of the initial findings in the Preliminary Report carries material financial liability. Although the program review technically covers only the 2013–2015 award years, the ED included a review of the treatment of student financial aid refunds for students who withdrew from a program prior to completion in 2017–2018. KHE cannot predict the outcome of this review, when it will be completed, whether any final findings of non-compliance with financial aid program or other requirements will impact KHE’s operations, or what liability or other limitations the ED might place on KHE or Purdue Global as a result of this review.services provided by KNA.
There are also two open program reviews at campuses that were part of the KHE Campuses business prior to its sale in 2015 to ECA. The ED’s final reports on the program reviews at former KHE Broomall, PA, and Pittsburgh, PA, locations are pending. KHE retains responsibility for any financial obligations resulting from these program reviews.
Prior to the transfer of the institutional assets and operations of KU to Purdue Global, onOn September 3, 2015, Kaplan sold substantially all of the assets of the KHE Campuses.former Kaplan Higher Education Campuses (KHE Campuses). As part of the transaction, similar to the transfer of KU, Kaplan retained liability for the pre-sale conduct of the KHE schools. Kaplan may also have liabilities under certain lease obligations. Although Kaplan no longer owns KU or the former KHE Campuses, Kaplan may be liable to the current owners of KU and the former KHE Campuses, respectively, for the pre-sale conduct of the schools.schools, and the pre-sale conduct of the schools has been and could be the subject of future compliance reviews, regulatory proceedings or lawsuits that could result in monetary liabilities or fines or other sanctions.
Non-Compliance WithOn May 6, 2021, Kaplan received a notice from the ED that it would be conducting a fact-finding process pursuant to the borrower defense to repayment regulations to determine the validity of more than 800 borrower defense to repayment claims and a request for documents related to several of Kaplan’s previously owned schools. Beginning in July 2021, Kaplan started receiving the claims and related information requests. In total, Kaplan received 1,449 borrower defense applications that seek discharge of approximately $35 million in loans. Most claims received are from former KU students. The ED’s process for adjudicating these claims is subject to the borrower defense regulations but it is not clear to what extent the ED will exclude claims based on the underlying statutes of limitations, evidence provided by Kaplan, or any prior investigation related to schools attended by the student applicants. Kaplan believes it has defenses that would bar any student discharge or school liability including that the claims are barred by the applicable statute of limitations, unproven, incomplete and fail to meet regulatory filing requirements. Kaplan expects to vigorously defend any attempt by the ED to hold Kaplan liable for any ultimate student discharges and is responding to all claims with documentary and narrative evidence to refute the allegations, demonstrate their lack of merit, and support the denial of all such claims by the ED. If the claims are successful, the ED may seek reimbursement for the amount discharged from Kaplan. If the ED initiates a reimbursement action against Kaplan following approval of former students’ borrower defense to repayment applications, Kaplan may be subject to significant liability.
•    Noncompliance with Regulations by KHE’sKNA’s Client Institutions May Adversely Impact Kaplan’s Results of Operations.
KHEKNA currently provides services to higher education institutions that are heavily regulated by federal and state laws and regulations and by accrediting body requirements. Presently,bodies. Currently, a substantial portion of KHE’s revenues areKNA’s revenue is attributable to service fees and deferred purchase price payments it receives under its agreement with Purdue Global, which are dependent upon revenuesrevenue generated by Purdue Global and upon Purdue Global’s eligibility to participate in the Title
29


IV federal student aid program. To maintain Title IV eligibility, Purdue Global and KHE’sKNA’s other client institutions must be certified by the ED as eligible institutions, maintain authorizations by applicable state education agencies and be accredited by an accrediting commission recognized by the ED. Purdue Global and KHE’sKNA’s other client institutions must also comply with the extensive statutory and regulatory requirements of the Higher Education Act and other state and federal laws and accrediting standards relating to their financial aid management, educational programs, financial strength, disbursement and return of Title IV funds, facilities, recruiting practices, representations made by the school and other parties, and various other matters. Additionally, Purdue Global and other client institutions are subject to laws and regulations that, among other things, limit student default rates on the repayment of Title IV loans; permit borrower defenses to repayment of Title IV loans based on certain conduct of the institution; establish specific measures of financial responsibility and administrative capability; regulate the addition of new campuses and programs and other institutional changes; require compliance with state professional licensure board requirements to the extent applicable to institutional programs; and require state authorization and institutional and programmatic accreditation. In addition, the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the Consolidated Appropriations Act of 2021, and subsequent guidance from the ED have created changes in the administration of federal financial assistance programs, the interpretation of which may not yet be fully understood.
If the ED finds that Purdue Global or any other KHEKNA client institution has failed to comply with Title IV requirements or improperly disbursed or retained Title IV program funds, it may take one or more of a number of actions, including fining the school, requiring the school to repay Title IV program funds, limiting or terminating the school’s eligibility to participate in Title IV programs, initiating an emergency action to suspend the school’s participation in the Title IV programs without prior notice or opportunity for a hearing, transferring the school to a method of Title IV payment that would adversely affect the timing of the institution’s receipt of Title IV funds,


requiring the submission ofschool to submit a letter of credit, denying or refusing to consider the school’s application for renewal of its certification to participate in the Title IV programs or for approval to add a new campus or educational program and referring the matter for possible civil or criminal investigation. There can be no assurance that the ED will not take any of these or other actions in the future, whether as a result of lawsuits, program reviews or otherwise. In addition, on October 15, 2021, Purdue Global received from the ED a new PPPA granting provisional certification until June 30, 2022. Under this PPPA, Purdue Global must apply for and receive approval for expansion or any substantial change before it may award, disburse or distribute Title IV funds based on the substantial change. Substantial changes generally include, but are not limited to: (a) establishment of an additional location; (b) increase in the level of academic offering beyond those listed in the institution's Eligibility and Certification Approval Report (ECAR); (c) addition of any educational program (including degree, non-degree or short-term training programs), or (d) the addition of any new degree program. In addition, the institution must pay any liabilities found in a currently open program review prior to the expiration of the PPPA. The provisional certification ends upon the ED's notification to the institution of the ED's decision to grant or deny a six-year certification to participate in the Title IV, HEA programs. If Purdue Global or another KNA client institution loses or has limits placed on its Title IV eligibility, accreditation or state licensure, or if Purdue Global or another KNA client institution is subject to fines, repayment obligations or other adverse actions owing to its or Kaplan’s noncompliance with Title IV regulations, accreditor or state agency requirements, or other state or federal laws, Kaplan’s financial results of operations could be adversely affected. Additionally, as a prior owner of Title IV institutions, KNA may retain certain liability for student loans related to the current BDTR applications described above or future similar applications.
In turn, any of the aforementioned consequences could have a material adverse effect on Kaplan’s operating results even though such institution’s compliance is affected by circumstances beyond Kaplan’s control, including, for example:
a reduction or loss in KHE’sKNA’s revenues under the TOSA or other client agreements if Purdue Global or any other KHEKNA client institution loses or has limits placed on its Title IV eligibility, accreditation or state licensure;
a reduction or loss in KHE’sKNA’s revenues under the TOSA or other client agreements if Purdue Global or any other client institution is subject to fines, repayment obligations or other adverse actions dueowing to non-compliancenoncompliance by Purdue Global (or Kaplan) with Title IV, accreditor or state agency requirements;
the imposition on KHEKNA of fines or repayment obligations to the ED or the termination or limitation on KHE’sKaplan’s eligibility to provide services to Purdue Global or other Title IV participating institutions if findings of non-compliancenoncompliance by Purdue Global or such other institution result in a determination that Kaplan failed to comply with statutory or regulatory requirements applicable to service providers; and
liability under the TOSA or other client agreements for non-compliancenoncompliance with federal, state or accreditation requirements arising from KHE’sKNA’s conduct.
•    Kaplan May Fail to Realize the Anticipated Benefits of the Purdue Global Transaction.
Kaplan’s ability to realize the anticipated benefits of the Purdue Global transaction will depend, in part, on its ability to successfully and efficiently provide services to Purdue Global. Achieving the anticipated benefits is subject to a
30


number of uncertainties, including whether the services can be provided in the manner and at the cost Kaplan anticipated and whether Purdue Global is able to realize anticipated student enrollment levels. If Kaplan is unable to effectively execute its post-transaction strategy, it may take longer than anticipated to achieve the benefits of the transaction or it may not realize those benefits at all. In 2022 Purdue Global began working with KNA to provide certain human resources, finance and accounting, facility management, and communications services itself, in-house.
•    Regulatory Changes and Developments Could Negatively Impact Kaplan’s Results of Operations.
Any legislative, regulatory or other development that has the effect of materially reducing the amount of Title IV financial assistance or other federal, state or private financial assistance available to the students of Purdue Global or any other client institution could have a material adverse effect on Kaplan’s business and results of operations. In addition, any development that has the effect of making the terms on which Title IV financial assistance or other financial assistance funds are available to Purdue Global’s or other client institutions’ students materially less attractive could have a material adverse effect on Kaplan’s business and results of operations.
The laws, regulations and other requirements applicable to KHEKNA or any KHEKNA client institutions are subject to change and to interpretation. Regulatory activity in 2022 may include possible restrictions on revenue sharing arrangements with universities, as discussed above, which could impact KNA Higher Education managed service provider contracts with Purdue, Purdue Global, Wake Forest and other client institutions. Additional regulatory, policy or legal changes could include imposing outcome metrics on universities, a form of free community college, changes to the financial aid system, and the reinstatement of broader borrower defenses to loan repayment. In addition, a Negotiated Rulemaking began in October 2021 that covered, in part, rules related to the borrower defense to repayment adjudication process and recovery from institutions, closed school loan discharges, disability loan discharges, public loan forgiveness, income driven repayment plans and arbitration agreements. As part of this current Rulemaking, in a session that began in January 2022, the ED also proposed a change to the Title IV definition of “Nonprofit” institution to generally exclude from that definition any institution that is an obligor on a debt owed to a former owner of the institution or maintains a revenue-based service agreement with a former owner of the institution. Such regulatory changes as well as those described above could subject Purdue Global to additional regulatory requirements. Any resulting new rules or changes to existing rules are not likely to be effective until July 1, 2023. In addition, there are other factors related to Purdue Global’s and other client institutions’ compliance with federal, state and accrediting agency requirements—many of which are largely outside of Kaplan’s control—that could have a material adverse effect on Purdue Global’s and other client institutions’ revenues and, in turn, on Kaplan’s operating results, including, for example:
Reduction in Title IV or other federal, state or private financial assistance: KHE KNA receives revenue based on its agreements with client institutions and particularly revenue from Purdue Global revenue under the TOSA. Purdue Global is expected to derive a significant percentage of its tuition revenues from its participation in Title IV programs. Any legislative, regulatory or other development that materially reduces the amount of Title IV, federal, state or private financial assistance available to the students of Purdue Global and other client institutions could have a material adverse effect on Kaplan’s business and results of operations. In addition, any development that makes the terms of such financial assistance less attractive could have a material adverse effect on Kaplan’s business and results of operations.
Compliance reviews and litigation: Institutions participating in the Title IV programs, including Purdue Global and other client institutions, are subject to program reviews, audits, investigations and other compliance reviews conducted by various regulatory agencies and auditors, including, among others, the ED, the ED’s Office of the Inspector General, accrediting bodies and state and various other federal agencies, as well as annual audits by an independent certified public accountant of compliance with Title IV statutory and regulatory requirements. Purdue Global and other client institutions also may be subject to various lawsuits and claims related to a variety of matters, including but not limited to alleged violations of federal and state laws and accrediting agency requirements. These compliance reviews and litigation matters could extend to activities conducted by KHEKNA on behalf of Purdue Global or other client institutions and to KHEKNA itself as a third-party servicer subject to Title IV regulations.


Legislative and regulatory change: Congress periodically revises the Higher Education Act and other laws and enacts new laws governing the Title IV programs and annually determines the funding level for each Title IV program and may make changes in the laws at any time. The ED and other federal and state agencies also may issue new regulations and guidance or change itstheir interpretation of new regulations at any time. For example, on September 23, 2019, the ED released new final regulations affecting the ability of student borrowers to obtain discharges of their obligations to repay certain Title IV loans that were first disbursed on or after July 1, 2020, and loans disbursed between July 2017 and July 1, 2020. The new regulations, among other things, expand the ability of borrowers to obtain loan discharges based on substantial misrepresentations. Application of these regulations to Purdue Global or other client institutions could materially affect revenue and result in liabilities to the ED. In addition, application of these regulations
31


to KNA for loans disbursed between July 1, 2017, and March 22, 2018, the close of the Purdue Global transaction, could materially affect Kaplan’s revenues. Additionally, changes to the ability of students to discharge loans owing to prior school closures could impose liability on Kaplan for loans made to students at institutions previously owned by Kaplan and closed during Kaplan’s ownership. ED also published final regulations on September 2, 2020, regarding distance education and various other matters. Any action by Congress or the ED that significantly reduces funding for Title IV programs or the ability of Purdue Global or other client institutions to receive funding through these programs could reduce Purdue Global’s or other client institutions’ enrollments and tuition revenues and, in turn, the revenues KHEKNA receives under the TOSA or other agreements. Any action by Congress or the ED that impacts the ability of Purdue Global or other client institutions to contract with KHEKNA to receive a share of revenue as deferred payment for the sale of KU or the ability of KNA to contract with any client institution to provide bundled services in exchange for a share of tuition revenue could require KHEKNA to modify the TOSA, other agreements andor its practices and could impact the revenues KHEKNA may receive under such agreements. Congress, the ED and other federal and state regulators may create new laws or take actions that may require Purdue Global, other client institutions or KHEKNA to modify practices in ways that could have a material adverse effect on Kaplan’s business and results of operations.
Increased regulatory scrutiny of postsecondary education and service providers: The increased scrutiny of online schools that offer programs similar to those offered by Purdue Global or other client institutions and of service providers that provide services similar to Kaplan’s has resulted, and may continue to result, in additional enforcement actions, investigations and lawsuits by the ED, other federal agencies, Congress, state Attorneys General and state licensing agencies. Recent enforcement actions have resulted in substantial liabilities, restrictions and sanctions and in some cases have led to the loss of Title IV eligibility and closure of institutions. The change of control of the executive branch and Congress in 2021 could increase the amount of regulation and scrutiny of service companies like Kaplan and online schools like Kaplan’s client institutions. This increased activity and other current and future activity may result in further legislation, rulemaking and other governmental actions affecting the amount of student financial assistance for which Purdue Global’s or other client institutions’ students are eligible, or Kaplan’s participation in Title IV programs as a third-party servicer to Purdue Global or such other client institutions’.institutions. In addition, increased scrutiny and legislative proposals restricting the ability of entities like KNA that provide certain admissions related services to Title IV participating institutions under revenue sharing arrangements could impact KNA agreements. Such scrutiny could result in requests to Kaplan for information or negative publicity that could adversely affect KNA and its client institutions.
•    Changes in the Extent to Which Standardized Tests Are Used in the Admissions Process by Colleges or Graduate Schools and Increased Competition Could Reduce Demand for KTPKNA Supplemental Education Test Preparation Offerings.
A substantial portion of Kaplan’s revenue is generated by KTP. The source of this income is fees charged forKNA Supplemental Education Exam Preparation provides courses that prepare students for a broad range of admissions examinations that are required for admission toconsidered by colleges and graduate schools. Historically, colleges and graduate schools have required standardized tests as part of the admissions process. There hasAs a result of the COVID-19 pandemic, a number of colleges and graduate schools have waived standardized tests as part of the admissions process for the upcoming academic year or longer. These changes have had a negative impact on KNA’s results of operations for the test preparation products. In addition, there had already been some movement away from thisthe historical reliance on standardized admissions tests among a small numbercertain colleges, which have phased out admissions tests, are in the process of colleges thatphasing out admissions tests or have adopted “test-optional” admissions policies. Moreover, as a part of a settlement in a lawsuit brought by students in 2019, a large public university will no longer use the SAT and ACT for admissions or scholarship decisions for its system of 10 schools. Any significant reduction in the use of standardized tests in the college or graduate school admissions processprocesses could have an adverse effect on Kaplan’s operating results.
Additionally, KNA faces increased competition from competitors offering lower-cost or free test prep products that may be used by students to piece together alternatives to traditional comprehensive test prep programs. Kaplan’s operating results may be adversely affected if student demand for KNA’s traditional comprehensive programs shifts to KNA’s lower-cost, standalone offerings, or if competitors offer lower-cost, standalone offerings or free test prep products that are more attractive to students than KNA’s products.
•    Postponement and Cancellation of Examinations and Changes in the Extent to Which Licensing and Proficiency Examinations Are Used to Qualify Individuals to Pursue Certain Careers Could Reduce Demand for Kaplan’s Offerings.
A substantialmaterial portion of KPKNA’s and KI’s revenue comes from preparing individuals for licensing or technical proficiency examinations in various fields. Any significant relaxation or elimination of licensing or technical proficiency requirements in those fields served by KPKNA’s and KI’s businesses could negatively impact Kaplan’s operating results.
Difficulties of Managing Foreign Operations Could Negatively Affect Kaplan’s Business.
Kaplan has operations and investments in a growing number of foreign countries, including Australia, Canada, China, Colombia, France, Hong Kong, India, Ireland, Japan, Myanmar, New Zealand, Nigeria, Saudi Arabia, Singapore, the U.K. and the United Arab Emirates. Operating in foreign countries presents a number of inherent risks, including the difficulties of complying with unfamiliar laws and regulations, effectively managing and staffing foreign operations, successfully navigating local customs and practices, preparing for potential political and economic instability and adapting to currency exchange rate fluctuations. Failure to effectively manage these risks could have a material adverse effect on Kaplan’s operating results.
Changes in International Regulatory and Physical Environments and Failure to Comply With Regulations Applicable to International Operations Could Negatively Affect International Student Enrollments and Kaplan’s Business.
Any significant changes to the regulatory environment or other factors, including geopolitical instability, imposition of international sanctions or a natural disaster or pandemic in either the students’ countries of origin or countries in which they desire to study, could negatively affect Kaplan’s ability to attract and retain students and negatively affect Kaplan’s operating results. In addition, any significant changes to visa policies or the tax environment inAs a country in which KI operates could negatively affect its operating results.
Kaplan is subject to a wide range of regulations relating to its international operations. These include domestic laws with extra-territorial reach, such as the U.S. Foreign Corrupt Practices Act; international laws, such as the U.K. Bribery Act; as well as the local regulatory regimesresult of the countries in which Kaplan operates. These regulationsCOVID-19 pandemic, a number of professional certification examinations have been cancelled or

32



change frequently. Compliance withpermanently altered. While the impact of these regulations requires utmost vigilance. Failure to comply can result in the imposition of significant penalties or revocation of Kaplan’s authority to operate in the applicable jurisdiction, each of which could have a material adverse effectchanges on Kaplan’s operatingoperations improved in 2021 relative to 2020, further changes and impacts on student timing due to the pandemic may impact Kaplan’s results.
KI’s operations, institutions and programs in the United States may be subject to state-level regulation and oversight by state regulatory agencies, whose approval or exemption from approval is necessary to allow an institution to operate in the state. These agencies may establish standards for instruction, qualifications of faculty, location and nature of facilities, financial policies and responsibility and other operational matters. Institutions that seek to admit international students are required to be federally certified and legally authorized to operate in the state in which the institution is physically located in order to be allowed to issue the relevant documentation to permit international students to obtain a visa.
A substantial portion of KI’s revenue comes from programs that prepare international students to study and travel in English-speaking countries, principally the U.S., the U.K., Australia and Singapore. KI’s ability to enroll students in these programs is directly dependent on its ability to comply with complex regulatory environments. For example, on June 23, 2016, the U.K. held a referendum in which voters approved a proposal that the U.K. leave the European Union (EU), commonly referred to as “Brexit.” The impact of Brexit on KI will depend, in part, on the outcome of future negotiations regarding the terms of the U.K.’s withdrawal from the EU, possibly including any transition period or the outcome of any “no deal” exit. A “no deal” exit would occur if the U.K. government is not able to reach agreement with the EU on either transition arrangements or its future relationship with the EU upon exit. This risk increased following the rejection of the proposed transition arrangements by the U.K. Parliament on January 15, 2019. A U.K. exit on a “no deal” basis could adversely impact the value of the British pound as compared to other currencies or potentially have other adverse consequences and may have a materially adverse impact on KI’s results of operations. Uncertainty over the outcome of the negotiations and the possibility of a “no deal” exit may materially or significantly diminish interest in traveling to the U.K. for study. If the U.K. is no longer viewed as a favorable study destination, KI’s ability to recruit international students will be adversely impacted, which would result in material adverse impacts to KI’s results of operations and cash flows. The U.K. government’s Immigration White Paper, issued in December 2018, clarified that EU nationals’ ability to enter the U.K. for long- or short-term study will change. EU national students seeking to study higher education courses will be broadly subject to similar rules as those that presently apply to non-EU international students (KI Pathways). EU national students seeking to study English-language courses will either require an Electronic Travel Authorization or a short-term student visa (KI English). EU nationals do not currently require visas or face other administrative barriers to study in the U.K. It is also expected that recruitment of staff from outside the U.K will become more difficult and that Kaplan may experience difficulties in attracting and retaining international staff in the U.K. It is unclear how international student recruitment agents and prospective international students will view the U.K. as a study destination after the introduction of these new requirements, the EU exit negotiations and the U.K.’s eventual exit from the EU. The introduction of new visa and other administrative requirements, Brexit and the perception of the U.K. as a less favorable study destination may have a materially adverse impact on KI’s ability to recruit international students, KI’s results of operations and cash flows. Additionally, if the U.K does not receive a determination of adequacy•    Liability under the EU General Data Protection Regulation, then flows of personal data within KI or between KI and its clients, suppliers, business partners and affiliates may be substantially disrupted.
Changes to levels of direct and indirect government funding for international education programs would also materially impact the success of KI’s operations. For example, if government funding for vocational education in Singapore were to be reduced or the training requirements materially changed, this could produce a material adverse effect on Kaplan’s operating results. Similarly, if access to student loan or other funding were to be lost for KI operations that admit students who are entitled to receive the benefit of this funding, this could also produce a material adverse effect on Kaplan’s operating results.
In January 2017, President Trump signed an executive order barring citizens from Syria, Iraq, Iran, Yemen, Libya, Somalia and Sudan from entering the U.S. for a certain period of time. Although the countries that were the subject of the order were subsequently modified, the order has been the subject of significant international press interest. Negative perceptions regarding travel to the U.S. could have a significant negative impact on KI’s ability to recruit international students, and Kaplan’s business could be adversely and materially impacted.
In December 2017, the Australian government established a Royal Commission into Misconduct in the Banking Superannuation and Financial Services Industry. The Commission’s investigations have uncovered, among other things, widespread issues around fee misuse, adviser misconduct, conflicted remuneration and errant breach reporting. These findings are expected to result in new legislation that would further increase the compliance burden on affected firms, that may in the short term adversely impact spending on training and Kl’s business in Australia.


Liability Under Real Estate Lease GuarantiesGuarantees for Certain Real Estate Leases That Werethat were Assigned to Education Corporation of America Could Have a Material Adverse Effect on the Company’s Results.
On September 3, 2015, Kaplan sold to ECA substantially all of the assets of the KHE Campuses. The transaction included the transfer of certain real estate leases that were guaranteed or purportedly guaranteed by Kaplan. As part of the transaction, Kaplan retained liability for, among other things, obligations arising under certain lease guarantees. ECA is currently in receivership, and has terminated all of its higher educationhigher-education operations other than theand has sold most, if not all, of its remaining assets (including New England College of Business (NECB)Business). TheAdditionally, the receiver has repudiated all of ECA’s real estate leases not connected to NECB.leases. Although ECA is required to indemnify Kaplan for any amounts Kaplan must pay due to ECA’s failure to fulfill its obligations under the real estate leases guaranteed by Kaplan, ECA’s current financial situationcondition and the existenceamount of secured and unsecured creditorscreditor claims outstanding against ECA make it unlikely that Kaplan will recover from ECA. If Kaplan is not successful in mitigating these liabilities, the Company’s results could be materially adversely impacted. In the second half of 2018, the Company recorded an estimated $17.5 million in losses on guarantor lease obligations in connection with this transaction in other non-operating expense.
Changes in U.K. Tax Laws Could Have a Material Adverse Effect on KI.
Her Majesty’s Revenue and Customs (HMRC), a department of the U.K. government responsible for the collection of taxes, has raised assessments against the Kaplan UK Pathways business for Value Added Tax (VAT) relating to 2017 and earlier years, which have been paid by Kaplan. In September 2017, in a case captioned Kaplan International Colleges UK Limited v. The Commissioners for Her Majesty’s Revenue and Custom, Kaplan challenged these assessments. The Company believes it has met all requirements under U.K. VAT lawrecorded an additional estimated $1.1 million in non-operating expense in 2019 and expects$1 million in non-operating expense in 2020, and $1.1 million in non-operating expense in 2021, in each case consisting of legal fees and lease costs. The Company continues to recovermonitor the £15.4 million receivable relatedstatus of these obligations.
Risks Related to the assessmentsCompany’s Television Broadcasting and subsequent payments that have been paid. Following a hearing held in January 2019, before the First Tier Tax Tribunal, all issues related to EU law in the case were referred to the Court of Justice of the European Union.Media Businesses
In March 2018, HMRC issued new VAT guidance indicating a change of policy in relation to certain aspects of a cost sharing exemption that could impact the U.K. Pathways business adversely if this guidance were to become law. As of December 31, 2018, this guidance had not yet been incorporated into U.K. law. If Kaplan is not successful in preserving a valid exemption under U.K. VAT law, the U.K. Pathways business would incur additional VAT expense in the future, which may materially adversely impact its financial results. In a separate matter, there is presently a legal case awaiting judgment at the Supreme Court in the U.K. that may impact U.K. Pathways’ ability to receive the benefit of an exemption from charging its students VAT on tuition fees. The case may reverse or amend existing law and guidance that permits private providers to qualify as a “college of a university” and, therefore, receive the benefit of an exemption from charging its students VAT on tuition fees. If the case restricts which businesses are capable of constituting “colleges of a university” and entitled to exemption, KI Pathways Colleges’ financial results may be materially adversely impacted if they are not able to meet any new requirements.
•    Changing Perceptions Aboutabout the Effectiveness of Television Broadcasting in Delivering Advertising MayCould Adversely Affect the Profitability of Television Broadcasting.
Historically, television broadcasting has been viewed as a cost-effective method of delivering various forms of advertising. There can be no guarantee that this historical perception will guide future decisions by advertisers. To the extent that advertisers shift advertising expenditures away from television to other media outlets, the profitability of the Company’s television broadcasting business could be adversely affected.

•    Increased Competition Resulting Fromfrom Technological Innovations in News, Information and Video Programming Distribution Systems and Changing Consumer Behavior Could Adversely Affect the Company’s Operating Results.
The continuing growth and technological expansion of Internet-basedinternet-based services has increased competitive pressure on the Company’s media businesses. Examples of such developments include online delivery of programming, technologies that enable users to fast-forward or skip advertisements and devices that allow users to consume content on demand and in remote locations while avoiding traditional commercial advertisements or subscription payments.cable and satellite subscriptions. Changing consumer behavior may also put pressure on the Company’s media businesses to change traditional distribution methods. The Company obtains significant revenue from its retransmission consent agreements with traditional cable and satellite distributors. These payments are on a per-subscriber basis and payments to the Company may decrease as customers “cut the cord” and cancel their cable and satellite subscriptions. The Company also receives payments for distribution of its stations’ signals on certain online “over-the-top” services, however these revenues may be less than those from traditional cable and satellite distribution. Anticipating and adapting to changes in technology and consumer behavior on a timely basis will affect the Company’s media businesses’ ability to continue to increase their revenue. The development and deployment of new technologies and changing consumer behavior have the potential to negatively and significantly affect the Company’s media businesses in ways that cannot now be reliably predicted and that may have a material adverse effect on the Company’s operating results.


•    Changes in the Nature and Extent of Government Regulations Could Adversely Affect the Company’s Television Broadcasting Business and Other Businesses.
The Company’s television broadcasting business operates in a highly regulated environment. Complying with applicable regulations has significantly increased, and may continue to increase, the costs, and has reduced the revenues, of the business. Changes in regulations have the potential to negatively impact the television broadcasting business, not only by increasing compliance costs and reducing revenues through restrictions on certain types of advertising, limitations on pricing flexibility or other means, but also by possibly creating more favorable regulatory environments for the providers of competing services. In addition, changes to the FCC’s rules governing broadcast ownership may affect the Company’s ability to expand its television broadcasting business and/or may enable the Company’s competitors to improve their market positions through consolidation. More generally, all of the Company’s businesses could have their profitability or their competitive positions adversely affected by significant changes in applicable regulations.
33


•    Transitionto the New Technical StandardStandards for Broadcast Television Stations May Alter the Competitive Environment in the Company’s Stations’ Markets or Cause the Company to Incur Increased Costs.
The Company cannot predict how the market will react to the new broadcast television station technical standard, ATSC 3.0, as the period for voluntary transition to the new standard has only recently begun, and some of the market rollouts originally planned for 2020 or 2021 have been approved.delayed by the COVID-19 pandemic. Equipment manufacturers began releasing certain TV set models with built-in ATSC 3.0-capable receivers in 2020, but ATSC 3.0-capable consumer devices are not yet widely available in the United States. ManyU.S. As part of the voluntary transition, many station groups are beginning to test ATSC 3.0 under experimental authority.streams. Notably, there is a large consortium led by the Pearl Media GroupTV (of which GMG is a member) that ishas been leading test trials in the Phoenix, market.Detroit, Portland and other markets. ATSC 3.0 streams are now available in more than 40 markets across the country. Competing stations that transition to ATSC 3.0 may increase competition for the Company’s stations and/or create competitive pressure for the Company’s stations to launch ATSC 3.0 streams. AnyAs noted above, GMG stations’ WDIV-TV, WKMG-TV and KPRC-TV have begun broadcasting ATSC 3.0 streams over the course of 2020 and 2021. The transition to ATSC 3.0 may cause the Company to incur substantial costs. In the event the Company transitions any or all of its stations to ATSC 3.0, there can be no guarantee that the Company would successfully earn sufficient additional revenues to offset such costs.costs over time. More generally, the deployment of ATSC 3.0 may have other material effects on the Company’s media businesses that cannot now be reliably predicted and that may have a material adverse effect on the Company’s operating results.
•    Potential Liability for Intellectual Property Infringement Could Adversely Affect the Company’s Businesses.
The Company periodically receives claims from third parties alleging that the Company’s businesses infringe on the intellectual property rights of others. It is likely that the Company will continue to be subject to similar claims, particularly as they relate to its media businesses. Other parts of the Company’s business could also be subject to such claims. Addressing intellectual product claims is a time-consuming and expensive endeavor, regardless of the merits of the claims. In order to resolve such claims, the Company may have to change its method of doing business, enter into licensing agreements or incur substantial monetary liability. It is also possible that one of the Company’s businesses could be enjoined from using the intellectual property at issue, causing it to significantly alter its operations. Although the Company cannot predict the impact at this time, if any such claim is successful, the outcome would likely affect the business utilizing the intellectual property at issue and could have a material adverse effect on that business’s operating results or prospects.
Risks Related to the Company’s Manufacturing Businesses
•    Failure to Comply with Environmental, Health, Safety and Other Laws Applicable to the Company’s Manufacturing Operations Could Negatively Impact the Company’s Business.
The Company’s operations are subject to extensive federal, state and local laws and regulations relating to the environment, as well as health and workplace safety, including those set forth by the OSHA, the Environmental Protection Agency (EPA) and state and local regulatory authorities in the U.S. Such laws and regulations affect operations and require compliance with various environmental registrations, licenses, permits, inspections and other approvals. The Company incurs substantial costs to comply with these regulations, and any failure to comply may expose the Company to civil, criminal and administrative fees, fines, penalties and interruptions in operations that could have a material adverse impact on the Company’s results of operations, financial position or cash flows.
•    The Company May Be Subject to Liability Claims That Could Have a Material Adverse Effect on Its Business.
The Company’s manufacturing operations are subject to hazards inherent in manufacturing and production-related facilities. An accident involving these operations or equipment may result in losses due to personal injury; loss of life; damage or destruction of property, equipment or the environment; or a suspension of operations. Insurance may not protect the Company against liability for certain kinds of events, including those involving pollution or losses resulting from business interruption. Any damages caused by the Company’s operations that are not covered by insurance, or are in excess of policy limits, could materially adversely affect the Company’s results of operations, financial position or cash flows.
•     Failure to Recruit and Retain Production Staff Needed to Meet Customer Demand Could Have a Material Adverse Effect on the Company’s Manufacturing Businesses.
The Company’s manufacturing operations are experiencing a highly competitive market for production labor that may limit its ability to meet customer demand. If staffing cannot be hired at a cost-efficient wage rate relative to product pricing, volume will be impacted. In addition, COVID-19 absenteeism and potential vaccine mandates announced in jurisdictions in which the Company’s manufacturing businesses operate, will result in employee attrition and difficulty in meeting labor needs. Both factors impacting labor availability could have an adverse effect on future revenues and costs, which could be material.
34


Risks Related to the Company’s Healthcare Business
•    Extensive Regulation of the Healthcare Industry Could Adversely Affect the Company’s Healthcare Businesses and Results of Operations.
The home health and hospice industries are subject to extensive federal, state and local laws, with regulations affecting a wide range of matters, including licensure and certification, quality of services, qualifications of personnel, confidentiality and security of medical records, relationships with physicians and other referral sources, operating policies and procedures, and billing and coding practices. These laws and regulations change frequently, and the manner in which they will be interpreted is subject to change in ways that cannot be predicted.
Reimbursement for services by third-party payers, including Medicare, Medicaid and private health insurance providers, may decline, while authorization, audit and compliance requirements continue to add to the cost of providing those services.
Managed-care organizations, hospitals, physician practices and other third-party payers continue to consolidate in response to the evolving regulatory environment, thereby enhancing their ability to influence the delivery of healthcare services and decreasing the number of organizations serving patients. This consolidation could adversely impact GHG’s businesses if they are unable to maintain their ability to participate in established networks. In addition, CSI Pharmacy and Weiss Medical both face risks from manufacturer supply shortages, competitive vertical integration and pricing power, and government intervention on drug pricing.
GHG is also subject to periodic and routine reviews, audits and investigations by federal and state government agencies and private payers, which could result in negative findings that adversely impact the business. CMS increasingly uses third-party, for-profit contractors to conduct these reviews, many of which share in the amounts that CMS denies. These reviews, audits and investigations consume significant staff and financial resources and may take years to resolve.
Continued Nursing Staffing Shortages Could Adversely Affect the Growth of the Company’s Healthcare Businesses.
The country’s severe shortage of nurses could adversely affect GHG’s ability to meet customer demand and may impact its ability to take on new business. In addition, competition to attract new nurses necessitates offering increased wages and benefits, which increases costs.
Risks Related to the Company’s Automotive Businesses
Termination or Non-renewal of a Dealership Agreement by an Automobile Manufacturer and Limitations on the Company’s Ability to Acquire Additional Dealerships Could Adversely Affect the Company’s Automotive Business and Results of Operations.
The Company’s automobile dealerships are dependent on maintaining strong relationships with manufacturers, and the Company’s ownership and operation of automobile dealerships is subject to its ability to comply with various requirements established by automobile manufacturers. The Company’s dealerships operate under separate agreements with each applicable automobile manufacturer. Manufacturers may terminate their agreements for a variety of reasons, including a dealership’s failure to meet a manufacturer’s standards for financial and sales performance, customer satisfaction, facilities and the quality of dealership management; and any unapproved change in ownership or management. These agreements also limit the Company’s ability to acquire multiple dealerships of the same brand within a particular market and preclude the Company from establishing new dealerships within an area already served by another dealer of the same vehicle brand. In addition, dealerships controlled by related parties of the management team operating the Company’s dealerships may restrict the Company’s ability to acquire new dealerships within an area in which such dealerships operate. Manufacturers also have the right of first refusal if the Company seeks to sell dealerships and may limit the Company’s ability to transfer ownership of a dealership without the prior approval of the manufacturer. Failure to maintain ownership of the dealerships in compliance with manufacturer agreements could constitute a breach of the agreements and could result in termination or non-renewal of existing dealer agreements. If one of the Company’s manufacturers does not renew its dealer agreement or terminates the agreement, the Company’s dealership would be unable to sell or distribute new vehicles or perform manufacturer authorized warranty service, which would adversely affect the Company’s automotive business.
Changes Affecting Automobile Manufacturers Could Adversely Affect the Company’s Automotive Business.
The Company’s dealerships are dependent on the products and services offered by the brand of automobiles that its dealerships sell. The ability of the Company’s dealerships to sell and service these brands may be adversely
35


affected by negative conditions faced by manufacturers such as negative changes to a manufacturer’s financial condition, negative publicity concerning a manufacturer or vehicle model, declines in consumer demand or brand preferences, changes in consumer preferences driven by fuel price volatility, disruptions in production and delivery, including those caused by natural disasters or labor strikes, new laws or regulations, including more stringent fuel economy and greenhouse gas emission standards, and technological innovations in ride-sharing, electric vehicles and autonomous driving. The ability of the Company’s dealerships to align with manufacturers and adapt to evolving consumer demand for electric vehicles could adversely affect new and used vehicle sales volumes, parts and service revenue and results of operations.
Changes to State Dealer Franchise Laws to Permit Manufacturers to Enter the Retail Market Directly and Technological Innovations Could Adversely Impact the Company’s Traditional Dealership Model.
Changes to state dealer franchise laws to permit the sale of new vehicles without the involvement of franchised dealers could adversely affect the Company’s dealerships. Certain manufacturers have been challenging state dealer franchise laws in many states and some have expressed interest in selling directly to customers. The Company’s dealership model could be adversely affected if new vehicle sales are allowed to be conducted on the internet without the involvement of franchised dealers.
Changes in a Manufacturer’s Incentive Programs Could Adversely Affect the Dealerships’ Sales Volume and Profit Margins.
Automobile manufacturers offer various marketing and sales incentive programs to promote and support new vehicle sales. These programs include customer rebates, dealer incentives on new vehicles, employee pricing, manufacturer floor plan interest assistance, advertising assistance and product warranties. A reduction or discontinuation of a manufacturer’s incentive programs could adversely affect vehicle demand and results of operations.
Changes in Environmental Regulations Governing the Operations of the Automotive Business Could Result in Increased Costs.
The Company is subject to a wide range of environmental laws and regulations, including those governing discharges into the air and water, the operation and removal of above-ground and underground storage tanks, the use, handling, storage and disposal of hazardous substances and other materials, and the investigation and remediation of environmental contamination at facilities that are owned or operated. The business involves the generation, use, handling and contracting for recycling or disposal of hazardous or toxic substances or wastes, including environmentally sensitive materials such as motor oil, filters, transmission fluid, antifreeze, refrigerant, batteries, solvents, lubricants, tires and fuel. The Company has incurred, and will continue to incur, capital and operating expenditures and other costs in complying with such laws and regulations and changes to such regulations could result in increased costs.
Changes in Economic Conditions and Vehicle Inventories Are Difficult to Predict and May Adversely Impact the Results of Operations of the Company’s Dealerships.
Sales of new and used vehicles are cyclical. Historically there have been periods of downturns characterized by weak demand due to general economic conditions, excess supplies, consumer confidence, discretionary income and credit availability. Recently, supply shortages have led to a period of higher average new and used selling prices as a result of strong consumer demand and inventory shortages related to supply chain disruptions and production delays at vehicle manufacturers. These conditions may deteriorate in the future. Changes in these conditions could materially adversely impact sales and related margins of new and used vehicles, parts and repair and maintenance services.
Risks Related to the Company’s Other Businesses
If Leaf is Unable to Successfully Drive Traffic to its Marketplaces and Media Properties and Expand its Customer Base for its Marketplaces, its Business and Results of Operations Would be Adversely Affected.
In order for Leaf’s businesses to grow, Leaf must attract new visitors and customers to its marketplaces and media properties and retain its existing visitors and customers. Leaf’s success in attracting traffic to its media properties and converting these visitors into repeat users depends, in part, upon Leaf’s ability to identify, create and distribute high-quality and reliable content through engaging products and Leaf’s ability to meet rapidly changing consumer demand. Leaf may not be able to identify and create the desired content or produce an engaging user experience in a cost-effective or timely manner, if at all. Leaf depends on search engines, primarily Google, to direct a significant amount of traffic to its media properties, and Leaf utilizes search engine optimization efforts to help generate search referral traffic to its media properties. If Leaf is unable to successfully modify its search engine optimization practices in response to changes regularly implemented by search engine algorithms and in search query trends, or
36


if Leaf is unable to generate increased or diversified traffic from other sources such as social media, email, direct navigation and online marketing activities, Leaf could experience substantial declines in traffic to its media properties and to its partners’ media properties, which would adversely impact Leaf’s business and results of operations. One of the key factors to growing the marketplace platforms for Society6 Group and Saatchi Art Group is expanding their new and repeat customer base. Their ability to attract new customers, some of whom may already purchase similar products from competitors, depends in part on Leaf’s ability to successfully drive traffic to Leaf’s marketplaces using social media platforms, email marketing campaigns and promotions, paid referrals and search engines.
If Leaf is Unable to Effectively Distribute its Media Content on Social Media Platforms or Effectively Optimize its Mobile Solutions in Order to Improve User Experience or Comply with Requirements of Leaf’s Advertising Partners, Leaf’s Business and Results of Operation Could Be Negatively Impacted.
The number of people who access the internet through mobile devices such as smartphones and tablets, rather than through desktop or laptop computers, has increased substantially in recent years. Additionally, individuals are increasingly consuming publisher content through social media platforms. If Leaf cannot effectively distribute its media content, products and services on these devices or through these platforms, Leaf could experience a decline in visits and traffic and a corresponding decline in revenue. The significant increase in consumption of Leaf’s media content on mobile devices and through social media platforms depresses revenue per one thousand visits, or RPVs. As a result of these factors, the increasing use of mobile devices and social media platforms to access Leaf’s content could negatively impact its business and results of operations.
Further, consumers are increasingly conducting online shopping on mobile devices, including smartphones and tablets, rather than on desktop or laptop computers. Although Leaf continually strives to improve the mobile experience for users accessing its marketplaces through mobile devices, the smaller screen size and reduced functionality associated with some mobile device interfaces may make the use of Leaf’s marketplace platforms more difficult or less appealing to its members. Historically, visits to Leaf’s marketplaces on mobile devices have not converted into purchases as often as visits made through desktop or laptop computers, and the average order value for mobile transactions has been lower than desktop transactions. If conversion rates and average order values for mobile transactions on Leaf’s marketplaces do not increase, the revenue and results of operations of Society6 Group and Saatchi Art Group may be adversely affected.
Leaf’s Businesses Face Significant Competition, Which Leaf Expects Will Continue to Intensify, and Leaf May Not Be Able to Maintain or Improve its Competitive Position or Market Share.
Leaf’s Society6 Group and Saatchi Art Group businesses compete with a wide variety of online and brick-and-mortar companies selling comparable products. Leaf expects competition to continue to intensify given the low barrier of entry into online channels and the increase in conversion and competition between online and offline businesses. Leaf’s Media Group faces intense competition from a wide range of competitors. Leaf’s current principal competitors include online media properties, some of which have much larger audiences than Leaf, for online marketing budgets. Leaf also competes with companies and individuals that provide specialized consumer information online, including through enthusiast websites, message boards and blogs. Many of Leaf’s current and potential competitors enjoy substantial competitive advantages, such as greater brand recognition, greater technical capabilities, access to larger customer bases and, in some cases, the ability to combine their online marketing products with traditional offline media such as newspapers or magazines. These companies may use these advantages to offer similar products and services at a lower price, develop different products to compete with Leaf’s current offerings and respond more quickly and effectively than Leaf can to new or changing opportunities, technologies, standards or customer requirements. For example, if Google chose to compete more directly with Leaf as a publisher of similar content, Leaf may face the prospect of the loss of business or other adverse financial consequences due to Google’s significantly greater customer base, financial resources, distribution channels and patent portfolio.
Failure to Recruit and Retain Employees in the Company’s Restaurants Could Adversely Impact the Company’s Restaurant Business.
Historically, competition among restaurant companies for qualified management and staff has been very high. The Company’s ability to recruit and retain managers and staff to operate the Company’s restaurants is critical to a customer’s dining experience. Failure to recruit and retain employees, low levels of unemployment or high turnover levels could negatively affect the Company’s restaurant business.
Food-Borne Illness Concerns and Damage to the Company’s Reputation Could Harm the Company’s Restaurant Business.
Historically, reports of food-borne illness or food safety issues, even if caused by food suppliers or distributors, have had negative effects on restaurant sales. Because food safety issues could be experienced at the source by food suppliers or distributors, food safety could, in part, be out of the Company’s control. Even instances of food-borne
37


illness at a location served by one of the Company’s competitors could result in negative publicity regarding the food service industry generally and could negatively impact restaurant revenue. Regardless of the source or cause, negative publicity about food-borne illness or other food safety issues could adversely impact the Company’s reputation. Similarly, publicity about litigation, violence, complaints or government investigations could have a negative effect on restaurant sales.
•    Concentration of the Company’s Restaurants in the Washington, D.C. Region Subjects the Company's Restaurant Business to Regional Economic Conditions.
The concentration of the Company’s restaurants in the Washington, D.C. region subjects it to adverse economic conditions and trends in the region that are out of the Company's control. For example, increases in the level of unemployment, a temporary government shutdown or a decrease in tourism would decrease customers’ disposable income available for discretionary spending. These and other national, regional and local economic pressures could result in decreases in customer traffic and lower sales and profits.
Risks Related to Cybersecurity, Information Technology and Data Management
•    System Disruptions and Security Threats to the Company’s Information Technology Infrastructure Could Have a Material Adverse Effect on Its Businesses and Results of Operations.
The Company relies extensively on information technology systems, networks and services, including Internetinternet sites, data hosting and processing facilities and tools and other hardware, software and technical platforms, some of which are managed, hosted, provided and/or used by third parties or their vendors, to assist in conducting the Company’s business.
The Company’s systems and the third-party systems on which it relies are subject to damage or interruption from a number of causes, including power outages; computer and telecommunications failures; computer viruses; security breaches; cyberattacks, including the use of ransomware; catastrophic events such as fires, floods, earthquakes, tornadoes orand hurricanes; infectious disease outbreaks (such as COVID-19); acts of war or terrorism; and design or usage errors by our employees, contractors or third-party service providers. Although the Company and the third-party service providers seek to maintain their respective systems effectively and to successfully address the risk of compromise of the integrity, security and consistent operations of these systems, such efforts may not be successful. As a result, the Company or its service providers could experience errors, interruptions, delays or cessations of service in key portions of the Company’s information technology infrastructure, which could significantly disrupt its operations and be costly, time consumingtime-consuming and resource intensiveresource-intensive to remedy. Any security breach or unauthorized access also could result in a misappropriation of the Company’s proprietary information or the proprietary information of the Company’s users, customers or partners, which could result in significant legal and financial exposure and damage to the Company’s reputation. If an actual or perceived breach of the Company’s security occurs, or if the Company’s consumer facing sites become the subject of external attacks that affect or disrupt service or availability, the market perception of the effectiveness of the Company’s security measures could be harmed and the Company could lose users, customers, advertisers or partners, all of which could have a material adverse effect on the Company’s business, financial condition and results of operations. Any security breach at a company providing services to the Company or the Company’s users, including third-party payment processors, could have similar effects and the Company may not be fully indemnified for the costs it may incur as a result of any such breach. To the extent that such vulnerabilities require remediation, such remedial measures could require significant resources and may not be implemented before such vulnerabilities are exploited. As the cybersecurity landscape evolves, the Company may also find it necessary to make significant further investments to protect data and infrastructure.infrastructure, including continuing to evaluate control changes and investments needed to support an increased remote workforce. Any of these events could have a material adverse effect on the Company’s businesses and results of operations. Sustained or repeated system failures or security breaches that interrupt the Company’s ability to process information in a timely manner or that result in a breach of proprietary or personal information could have a material adverse effect on the Company’s operations and reputation.


•    Failure to Comply Withwith Privacy Laws or Regulations Could Have an Adverse Effect on the Company’s Businesses.
Various U.S. federal, state and international laws and regulations govern the collection, use, retention, sharing and security of consumer data. This area of the law is evolving, and interpretations of applicable laws and regulations differ. Legislative activity in the privacy area may result in new laws that are relevant to the Company’s operations, including restrictions on the collection, use and sharing of consumer data that could limit our ability to use the data for marketing or advertising, thatand could result in exposure to material liability. For example, new general data privacy regulations adopted by the European Union known as the General Data Protection Regulation (GDPR), became effective in May 2018. These regulations require companiescertain of the Company’s operations to meet extensive requirements regarding the handling of personal data, including its use, protection and transfer andtransfer. In addition, the ability ofGDPR provides the legal right for persons whose data is stored to correctrequest access to or delete suchcorrection or deletion of their
38


personal data, about themselves.among other rights. Failure to meet the applicable requirements in the GDPR could result in fines of up to 4% of the Company’s annual global revenues. In addition to the GDPR in Europe, new privacy laws and regulations are rapidly developing elsewhere around the globe, including amendments to the scope, penalties and other provisions of existing data protection laws. Failure to comply with these international data protection laws and regulations could have a negative impact on the Company’s reputation and subject the Company to significant fines, penalties or other liabilities, all of which may increase the cost of operations, reduce customer growth, or otherwise harm the Company’s business.
The California Consumer Privacy Act of 2018 California adopted(CCPA), which became effective on January 1, 2020, provided a new privacy law, scheduledprivate right of action for data breaches and requires companies that process personal information pertaining to goCalifornia residents to make disclosures to consumers about their data collection, use and sharing practices and allows consumers to opt out of certain data sharing with third parties. The enforcement of the CCPA by the California Attorney General commenced on July 1, 2020. In November 2020, the California Privacy Rights Act (CPRA) was approved by California voters, and goes into effect on January 1, 2023. The CPRA includes new requirements that are not in the CCPA. In 2020, Virginia and Colorado passed similar laws that borrows heavily fromare effective January 1, 2023 and July 1, 2023, respectively. In addition, data privacy bills have been introduced in various U.S state legislatures, including, but not limited to Washington, New York and Florida. There are also bills that have been introduced at the GDPR.U.S. federal level. The passage of any additional laws could result in further uncertainty and cause the Company to incur additional costs and expenses in order to comply. Compliance with the GDPR, the CCPA, the CPRA and other applicable international and U.S. privacy laws can be costly and time consuming. time-consuming. If the Company fails to properly respond to security breaches of its or its third-party’s information technology systems or fails to properly respond to consumer requests under these laws, the Company could experience damage to its reputation, adverse publicity, loss of consumer confidence, reduced sales and profits, complications in executing the Company’s growth initiatives and regulatory and legal risk, including criminal penalties or civil liabilities.
Claims of failure to comply with the Company’s privacy policies or applicable laws or regulations could form the basis of governmental or private-partyprivate party actions against the Company and could result in significant penalties. Additionally, evolving concerns regarding data privacy may cause the Company’s customers and potential customers to resist providing the data necessary to allow the Company to deliver its solutions effectively. Even the perception that personal information is not satisfactorily protected or does not meet regulatory requirements could inhibit sales and any failure to comply with such laws and regulations could lead to significant fines, penalties or other liabilities. Such claims and actions could cause damage to the Company’s reputation and could have an adverse effect on the Company’s businesses.
Extensive Regulation of the Healthcare Industry Could Adversely Affect the Company’s Healthcare Businesses and Results of Operations.Financial Risks
The home health and hospice industries are subject to extensive federal, state and local laws, with regulations affecting a wide range of matters, including licensure and certification, quality of services, qualifications of personnel, confidentiality and security of medical records, relationships with physicians and other referral sources, operating policies and procedures, and billing and coding practices. These laws and regulations change frequently, and the manner in which they will be interpreted is subject to change in ways that may not be predicted.
Effective January 1, 2020, the Center for Medicare and Medicaid Services (CMS) is proposing to overhaul the home health prospective payment system. Specifically, CMS is moving forward with a new payment model that will decrease reimbursement for cases with high therapy utilization and increase billing costs by significantly increasing billing requirements. In addition, CMS has implemented a rigorous system of claim reviews to identify improper home health billing and limit fraudulent claims. Pre-claim review disrupts the current healthcare delivery model and results in additional home health operational costs for chart reviews, preparation and response to CMS.
Reimbursement for services by third-party payers, including Medicare, Medicaid and private health insurance providers, continues to decline, while authorization, audit and compliance requirements continue to add to the cost of providing those services. In 2018, an anticipated extensive overhaul of Medicare reimbursement for the home health benefit was delayed, but is likely to be revisited in the future.
Managed-care organizations, hospitals, physician practices and other third-party payers continue to consolidate in response to the evolving regulatory environment, thereby enhancing their ability to influence the delivery of healthcare services and decreasing the number of organizations serving patients. This consolidation could adversely impact Graham Healthcare Group’s businesses if they are unable to maintain their ability to participate in established networks.
GHG also is subject to periodic and routine reviews, audits and investigations by federal and state government agencies and private payers, and these audits could result in negative findings that adversely impact the business. CMS increasingly uses third-party, for-profit contractors to conduct these reviews, many of whom share in the amounts that CMS denies. These reviews, audits and investigations consume significant staff and financial resources and may take years to resolve.
Failure to Comply With Environmental, Health, Safety and Other Laws Applicable to The Company’s Manufacturing Operations Could Negatively Impact the Companys Business.
The Company’s manufacturing operations are subject to extensive federal, state and local laws and regulations relating to the environment, as well as health and workplace safety, including those set forth by the Occupational Safety and Health Administration (OSHA) and the Environmental Protection Agency (EPA) and state and local regulatory authorities in the U.S. Such laws and regulations affect manufacturing operations and require compliance with various environmental registrations, licenses, permits, inspections and other approvals. The Company incurs substantial costs to comply with these regulations, and any failure to comply may expose the Company to civil, criminal and administrative fees, fines, penalties and interruptions in operations that could have a material adverse impact on the Company’s results of operations, financial position or cash flows.


The Company May Be Subject to Liability Claims That Could Have a Material Adverse Effect on Its Business.
The Company’s manufacturing operations are subject to hazards inherent in manufacturing and production-related facilities. An accident involving these operations or equipment may result in losses due to personal injury; loss of life; damage or destruction of property, equipment or the environment; or a suspension of operations. Insurance may not protect the Company against liability for certain kinds of events, including events involving pollution or against losses resulting from business interruption. Any damages caused by the Company’s operations that are not covered by insurance, or are in excess of policy limits, could materially adversely affect the Company’s result of operations, financial position or cash flows
•    Failure to Successfully Integrate Acquired Businesses Could Negatively Affect the Company’s Business.
Acquisitions involve various inherent risks and uncertainties, including difficulties in efficiently integrating the service offerings, accounting and other administrative systems of an acquired business; the challenges of assimilating and retaining key personnel; the consequences of diverting the attention of senior management from existing operations; the possibility that an acquired business does not meet or exceed the financial projections that supported the purchase price; and the possible failure of the due diligence process to identify significant business risks or liabilities associated with the acquired business. In June 2021, the Company acquired Leaf, a diversified consumer internet company that builds creator-driven brands in lifestyle and home and art design categories. A failure to effectively manage growth and integrate acquired businesses such as Leaf could have a material adverse effect on the Companys operating results.
•    Changes in Business Conditions Have Caused and May in the Future Cause Goodwill and Other Intangible Assets to Become Impaired.
Goodwill generally represents the purchase price paid in excess of the fair value of net tangible and intangible assets acquired in a business combination. Goodwill is not amortized and remains on the Company’s balance sheet indefinitely unless there is an impairment or a sale of a portion of the business. Goodwill is subject to an impairment test on an annual basis and when circumstances indicate that an impairment is more likely than not. Such circumstances include an adverse change in the business climate for one of the Company’s businesses or a decision to dispose of a business or a significant portion of a business. TheEach of the Company’s businesses each facefaces uncertainty in theirits business environment due to a variety of factors.factors, including challenges in operating environments created by the COVID-19 pandemic. In the first quarter of 2020, the Company recorded a goodwill and indefinite-lived intangible asset impairment charge at Clyde’s and an indefinite-lived intangible asset impairment charge at the auto dealerships. In the third quarter of 2021, the Company recorded a goodwill impairment charge at Dekko. Additional COVID-19 disruptions could result in future adverse changes in projections for future operating results or other key assumptions, such as projected revenue, profit margin, capital expenditures or cash flows associated with fair value estimates and could lead to additional future impairments, which could be material. The Company may experience other unforeseen circumstances that adversely affect the value of the Company’s goodwill or intangible
39


assets and trigger an evaluation of the amount of the recorded goodwill and intangible assets. There also exists a reasonable possibility that changes to the discounted cash flowcash-flow model used to perform the quantitative goodwill impairment review, including a decrease in the assumed projected cash flows or long-term growth rate, or an increase in the discount rate assumption, could result in an impairment charge. Future write-offs of goodwill or other intangible assets as a result of an impairment in the business could materially adversely affect the Company’s results of operations and financial condition.
The Spin-Off of Cable ONE Could Result in Significant Tax Liability to the Company and Its Stockholders.
In connection with the Company’s spin-off of Cable ONE, it received a written opinion of counsel to the effect that the distribution of Cable ONE common stock in the spin-off (Distribution) should qualify for non-recognition of gain and loss under Section 355 of the Internal Revenue Code.
The opinion assumed that the spin-off was completed according to the terms of the transaction documents for the spin-off and relied on the facts as stated in those documents and a number of other documents. The opinion cannot be relied on if any of these assumptions or statements is incorrect, incomplete or inaccurate in any material respect. The opinion of counsel is not binding on the Internal Revenue Service or the courts, and there can be no assurance that the Internal Revenue Service or a court will not take a contrary position.
If the Distribution were determined not to qualify for non-recognition of gain and loss, the Company, its stockholders who received shares of Cable ONE common stock in the Distribution, or both, could be subject to tax. Any such tax liability could be material.
Item 1B. Unresolved Staff Comments.
Not applicable.
Item 2. Properties.
The Company leases space for its corporate offices in Arlington, VA. The space consists of 33,815 square feet of office space, and the lease expires in 2024, subject to an option of the Company to extend.
Directly or through its subsidiaries, Kaplan owns a total of four commercial properties: a 26,000-square-foot, six-story building located at 131 West 56th Street in New York City, used by the Kaplan Test Preparation divisionKNA as an education center primarily for medical students; a redeveloped 47,410-square-foot, four-story brick building in Lincoln, NE,


used by Purdue Global; a 4,000-square-footan office condominium in Chapel Hill, NC, utilizedused by KTP; andKNA; a 15,000-square-foot, three-story building in Berkeley, CA, used for classroom space by KTPKNA and KICKI North America.America; and, in August 2021, MPW purchased a building in South Kensington, London intended for academic dormitory space. KI has also entered into a 135-year lease of land in Liverpool, U.K., and is in on which it completed the processconstruction of constructing college and dormitory space totaling 138,000 square feet that is scheduled to openopened in August 2019.January 2020.
In the U.S., Kaplan, Inc. and KHE leaseKNA leases space in Fort Lauderdale, FL, for corporate offices, together with a data center,and call centercenters and employee-training facilities, in two 97,000-square-foot buildings located on adjacent lots in Fort Lauderdale, FL. Both of thosewhich leases will expire in 2024. Kaplan, Inc. and KHE shareIn addition, KNA leases corporate office spaceoffices in a 23,364-square-foot office building in Alpharetta, GA,La Crosse, WI, under a lease that expiresexpiring in 2021. KHE leases 62,500 square feet of corporate office space2023 and in Chicago, IL,Pittsburgh under a lease that will expireexpiring in 2022 (of which approximately 21,000 square feet have been subleased through2024. KNA has 18 smaller leases in the remainder of the term). KHE also separately leases 76,500 square feet of office space in Chicago, IL; however, the location has been entirely subleased through the remainder of the lease term. KHE also separately leases a two-story, 124,500-square-foot building in Orlando, FL, that is used as an additional support center (of which approximately 94,000 square feet have been subleased to third parties), pursuant to a lease that will expire in 2021;U.S. and 85,600 square feet of corporate office space in Plantation, FL (which has been entirely subleased to a third party), for a term that expires in 2021. Kaplan, Inc. and KTP have signed a sublease for 85,600 square feet in New York (expiring in February 2021). Kaplan, Inc. and KTP also separately lease 159,540 square feet in New York; however, the location has been entirely subleased to a third party through the remainder of the lease term. KTP has an additional 63 leases comprising approximately 190,119 square feet of office and instructional space. KTP also delivers classes at schools, colleges, hotels and other premises for which KaplanKNA is not a leaseholder. KPKaplan, Inc. leases two corporate offices, totaling 64,128 square feet,office space in La Crosse, WI, under leasesAlpharetta, GA, pursuant to a lease that will expireexpires in 2022.
In addition, the KI English2024. The Kaplan Languages Group business maintains more than 1914 leases in the U.S., comprising an aggregate of more than 250,000 square feet offor office and instructional space.space in the U.S.
Overseas, Dublin Business School’s facilities in Dublin, Ireland, are located in fivethree buildings aggregating approximately 74,000 square feet of space, thatwhich are rented under leases expiring between 20242028 and 2029. Kaplan Publishing has an office and distribution warehouse in Wokingham, Berkshire, U.K., of 27,000 square feet, under a lease expiring in 2027. Kaplan Financial’s largest leaseholds are office and instructional spaces in London, U.K., of 33,000 square feet (expiringexpiring in 2033)2033, and 50,200 square feet (comprising two leases) obtained in January 2015 andleases, expiring in 2030; office and instructional space in Birmingham, U.K., of 19,220 square feet (expiringexpiring in 2027);2027; two locations in Manchester, U.K. comprising an office for central support services expiring in 2027, and office and instructional space in Manchester, U.K., of 15,900 square feet (comprising four separate leases, expiring in 2022);2027; office and instructional space in Singapore, of 162,000 square feet (comprising fivecomprising two separate leases and expiring between 20192022 and 2021);2023; and office and instructional space in Hong Kong of 30,850 square feet.
expiring in 2025. Palace House in London, U.K., is primarily occupied by the KI Pathways business with 20,200 square feet of space (comprisingand KI corporate offices comprising several separate leases expiring in 2032). The KI Pathways business2032. Kaplan has also entered into a separate lease agreement under which it will agree to take further additional leases in Palace House (also expiring in 2032) totaling approximately 22,281 square feet, now that certain work has been completed in the building. Once the additional leases are complete, the Palace House leases will total approximately 44,078 square feet.
Kaplan has a lease expiring in 20262027 for education space in Nottingham, U.K., totaling 16,455 square feet. In addition, Kaplan has entered into two separate It also leases in Glasgow, Scotland, for 58,000 square feet and 22,400 square feet, respectively, of dormitory space that was constructed and opened to students in 2012. These leases expire in 2032. In addition, Kaplan leases approximately 143,000 square feet of dormitory space as the main tenant of a student residential building in Nottingham, U.K. Kaplan has two separate leases in Glasgow, Scotland for dormitory space that was constructed and opened to students in 2012 which leases expire in 2032. Kaplan has further entered into a lease for a residential college in Bournemouth, England, which comprises approximately 175,000 square feet. Kaplan has entered into an agreement forand a lease in Brighton, U.K., for dormitory space totaling 128,779 square feet. This lease, once granted, is anticipated to expirewhich expires in 2040, subject to possible permitted delays, which could extend the expiry date to 2041 or 2042. Kaplan has further entered into a conditional agreement for a lease in Bath, U.K., of newly constructed dormitory and education space totaling 151,353 square feet once conditions are met and construction has been completed. Kaplan believes that it is unlikely that the conditions precedent for the lease to be granted will be met. If granted, the term of the lease will be 21 years and seven days.2040. In Australia, Kaplan leases one location in Melbourne, with an aggregate of approximately 76,000 square feet; three locations in Sydney, of approximately 48,000 square feet; one location in Brisbane, of approximately 22,000 square feet; and three locations in Adelaide of approximately 44,750 square feet. Theseunder leases expire at various times, from 2019expiring between 2022 through 2022. The University of Adelaide College (formerly Bradford College), in Adelaide, Australia, leases one location, with an aggregate of approximately 22,184 square feet; and Murdoch Institute of Technology is housed in one location on the Murdoch University campus, under a license agreement for 3,750 square feet. In New Zealand, Kaplan leases two locations (within the same campus) of approximately 10,300 square feet, one of which expires in 2021. All other Kaplan facilities in the U.S. and overseas (including administrative offices and instructional locations) occupy leased premises that are for less space than those listed above.2031.


The offices of the Company’s broadcasting operations are located in leased space in Chicago, IL. The operations of each of the Company’s television stations are owned by subsidiaries of the Company, as are the related tower sites, (exceptexcept in Houston, Orlando and Jacksonville, where the tower sites are 50% owned).owned.
Hoover owns nine U.S. properties: a 29-acre site in Thomson, GA; a 35-acre site in Pine Bluff, AR; a 60-acre site in Milford, VA; a 15-acre site in Detroit, MI; a 14-acre site in Bakersfield, CA; a 17-acre site in Oxford, PA; a 15-acre site in Halifax, NC; an 11-acre site in Belington, WV; and a 65-acre site in Havana, FL. In addition, Hoover leases a 10-acre site in Winston, OR, on a long-term lease with renewal terms available through December 31, 2044. Hoover’s corporate, sales and accounting office, and research, engineering and development offices are also located on the Thomson, GA, campus.
Dekko owns four U.S. properties: manufacturing buildings in Garrett, IN and Avilla, IN; a manufacturing and warehouse space in Ardmore, AL; and a warehouse space in El Paso, TX. In addition, Dekko owns two buildings in Juarez, Mexico, one of which consists of manufacturing and office space and the other consists of manufacturing and office space. In the U.S., Dekko leases headquarters and innovation center space in Fort Wayne, IN, under a lease that expires in 2029; manufacturing and warehouse space in North Webster, IN, under a lease that expires in 2022; warehouse space in Kendallville, IN, under a lease that expires in 2022; manufacturing, warehouse and office space in Shelton, CT and in Fallston, NC, under leases that expire 2022-2024; and office space in Grand Rapids, MI, that expires in 2024.
40


Joyce/Dayton owns three properties: its corporate headquarters in Kettering, OH, and manufacturing facilities in Portland, IN, and Clayton, OH. It also leases a manufacturing facility in Newington, CT.
Forney leases corporate office space in Addison, TX under a lease that expires in 2024, and leases a distribution center in Laredo, TX, under a lease that expires in August 2022. Forney’s manufacturing facility in Monterrey, Mexico, is in a building that contains office and manufacturing space under a lease that expires in 2022. Forney also leases offices in Shanghai, China, under a lease that expires in December 2022.
The corporate office of GHG is located in leased office space in Troy, MI. GHG also leases a small office in Nashville, TN. GHG leases small office spaces in Mechanicsburg, PA; Williamsport, PA; Harrisburg, PA; Kingston, PA; Milford, PA; Stroudsburg, PA; New Castle, PA; Warrendale, PA; Shiloh, IL; Marion, IL; Glen Carbon, IL; Troy, MI; Grand Rapids, MI; Lansing, MI; Lapeer, MI; Zephyrhills, FL; Osprey; FL; Palmetto, FL; Downers Grove, IL; and Downer’s Grove, IL.Nashville, TN. In addition, GHG leases space for a hospice inpatient unit in Wilkes-Barre, PA, andfor nursing offices at Edward and Elmhurst hospitals in northern Illinois. GHG leases office space for Weiss Medical in Riverdale, NJ. GHG also has leased office space in Mars, PA, which expires in October 2022. GMGGHG also owns property in Benton, IL.
Forney has 20,000 square feet of corporateGraham Automotive owns the Honda dealership space in Tysons Corner, VA. Graham Automotive leases space in Rockville, MD, for its Lexus dealership, Bethesda MD for its Jeep dealership, and Manassas, VA for its Ford dealership. These leases expire between 2036 to 2060, including renewal options.
Leaf leases office space in Addison, TX, under aSanta Monica, California that serves as its corporate headquarters. The lease thatfor its Santa Monica facility expires in July 2024. Forney’s manufacturing facility is locatedLeaf also leases additional facilities and purchase service memberships in Monterrey, Mexico,Denver, Colorado, New York, New York and London, United Kingdom.
Clyde’s leases restaurant facilities in a building that contains 85,169Maryland, Virginia and Washington, D.C., under non-cancellable lease agreements. The restaurant facilities average just over 15,000 square feet, ranging from 10,000 to 30,000 square feet. Renewal options are available on many of officethe leases for one or more periods of five to 10 years each. Final lease expiration dates range from 2022 to 2051.
Framebridge leases retail locations in Washington, D.C. (2), Bethesda, MD (1), Northern Virginia, VA (2), Chicago, IL (3), Brooklyn, NY (2), Atlanta, GA (2), Manhattan, NY (1), Boston suburb (1), Philadelphia suburb (1) and manufacturing space under a lease that expires in 2020. Forney leases a 3,000-square-foot distribution center in Laredo, TX, under a lease that expires in May 2019. Forney also leases sales offices in Shanghai, China.
Joyce/Dayton owns three properties: its corporate headquarters in Kettering, OH, andtwo manufacturing facilities in Portland, IN,Richmond, KY and Clayton, OH. It alsoMoorestown, NJ.
Code3 leases a manufacturing facility in Newington, CT.
Dekko owns five U.S. properties: a 200,600-square-foot headquarters office and manufacturing building in Garrett, IN; a 77,200-square-foot manufacturing building in Avilla, IN; 64,500 square feet of manufacturing and warehouse space in Ardmore, AL; 61,750 square feet of warehouse space in El Paso, TX;New York, NY; Los Angeles, CA; and a 22,500-square-foot new product development center in LaOtto, IN. In addition, Dekko owns two buildings in Juarez, Mexico, one of which is 132,150 square feet of manufacturing and office space and the other is 65,111 square feet of manufacturing and office space. In the U.S., Dekko leases 46,370 square feet of manufacturing and warehouse space in North Webster, IN, under a lease that expires in 2019; a 30,000-square-foot warehouse building in Kendallville, IN, under a lease expiring in 2098; and a data/training facility in Kendallville, IN, under a lease expiring in 2020. Electri-Cable Assemblies leases 33,208 square feet of manufacturing and warehouse space in Shelton, CT, under a lease that expires in 2021 and 24,324 square feet of manufacturing and warehouse space in Shelton, CT, under a lease that expires in 2020. Furnlite leases 80,400 square feet of manufacturing and warehouse space in Fallston, NC, under a lease that expires in 2023.
Hoover owns nine U.S. properties: a 29-acre site in Thomson, GA; a 35-acre site in Pine Bluff, AR; a 60-acre site in Milford, VA; a 15-acre site in Detroit, MI; a 14-acre site in Bakersfield, CA; a 17-acre site in Oxford, PA; a 15-acre site in Halifax, NC; an 11-acre site in Belington, WV; and a 65-acre site in Havana, Fl. In addition, Hoover leases a 10-acre site in Winston, OR, on a long-term lease with renewal terms available through December 31, 2044. Hoover’s corporate, sales and accounting office, and research, engineering and development offices are also located on the Thomson, GA, campus.Cleveland, OH.
The Slate Group leases office space in Brooklyn, NY, and Washington, DC.D.C.
SocialCode leases office space in Washington, DC; New York, NY; San Francisco, CA; Los Angeles, CA; Cleveland, OH; and Austin, TX.
Item 3. Legal Proceedings.
On February 6, 2008, a purported class-action lawsuit was filedInformation with respect to legal proceedings may be found in the U.S. District Court for the Central District of California by purchasers of BAR/BRI bar review courses, from July 2006 onward, alleging antitrust claims against KaplanNote 18, “Contingencies and West Publishing Corporation, BAR/BRI’s former owner. On April 10, 2008, the court granted defendants’ motion to dismiss, a decision that was reversed by the Ninth Circuit Court of Appeals on November 7, 2011. The Ninth Circuit also referred the matter to a mediator for the purpose of exploring a settlement. In the fourth quarter of 2012, the parties reached a comprehensive agreement to settle the matter. The settlement was approved by the District Court in September 2013. In the fourth quarter of 2017, the Ninth Circuit remandedother commitments - Litigation, Legal and Other Matters” to the District Court, which, once again, set attorneys’ fees on January 11, 2018. Distribution of settlement funds was madeconsolidated financial statements in December 2018, and the claims administration process has been completed.
During 2014, certain Kaplan subsidiaries were subject to unsealed cases filed by former employees that include, among other allegations, claims under the False Claims Act relating to eligibility for Title IV funding. The U.S. government declined to intervene in all cases, and, as previously reported, court decisions either dismissed the cases in their entirety or narrowed the scope of their allegations. The remaining case is captioned United States of America ex rel. Carlos Urquilla-Diaz et al. v. Kaplan University et al. (unsealed March 25, 2008). On August 17, 2011, the U.S. District Court for the Southern District of Florida issued a series of rulings in the Diaz case, which included three separate complaints: Diaz, Wilcox and Gillespie. The court dismissed the Wilcox complaint in its entirety; dismissed all False Claims Act allegations in the Diaz complaint, leaving only an individual employment claim; and dismissed in part the Gillespie complaint, thereby limiting the scope and time frame of its False Claims Act allegations regarding compliance with the U.S. Federal Rehabilitation Act. On October 31, 2012, the court


entered summary judgment in favor of the Company as to the sole remaining employment claim in the Diaz complaint. On July 16, 2013, the court likewise entered summary judgment in favor of the Company on all remaining claims in the Gillespie complaint. Diaz and Gillespie each appealed to the U.S. Court of Appeals for the Eleventh Judicial Circuit. Arguments on both appeals were heard on February 3, 2015. On March 11, 2015, the appellate court issued a decision affirming the lower court’s dismissal of all of Gillespie’s claims. The appellate court also dismissed three of the four Diaz claims, but reversed and remanded on Diaz’s claim that incentive compensation for admissions representatives was improperly based solely on enrollment counts. Kaplan filed an answer to Diaz’s amended complaint on September 11, 2015. Kaplan filed a motion to dismiss Diaz’s claims, and a hearing was held on December 17, 2015. On March 24, 2016, the Court denied the motion to dismiss. Discovery in the case closed in January 2017. Kaplan filed a motion for summary judgment on February 21, 2017. Summary judgment was granted in full and entered on July 13, 2017. Diaz filed a notice of appeal in September 2017 and filed his initial brief. Kaplan filed a response brief in the third quarter 2018. The matter is not likely to be decided until mid-2019.
On October 19, 2018, a lawsuit was filed against KHE and other unrelated parties in El Paso, TX, County District Court alleging liability for default on a real property lease by Education Corporation of America (ECA). On November 19, 2018, this matter was removed to the U.S. District Court for the Western District of Texas. KHE’s responsive pleading was filed in January 2019. On September 3, 2015, Kaplan sold to ECA substantially all of the assets of KHE nationally accredited on-ground Title IV eligible schools (KHE Campuses). The transaction included the transfer of certain real estate leases that were guaranteed by Kaplan. As part of the transaction, Kaplan retained liability for, among other things, obligations arising under certain lease guarantees. ECA is currently in receivership and has terminated all of its higher education operations other than the New England College of Business (NECB). The receiver has repudiated all of ECA’s real estate leases not connected to NECB. Although ECA is required to indemnify Kaplan for any amounts Kaplan must pay due to ECA’s failure to fulfill its obligations under real estate leases guaranteed by Kaplan, ECA’s financial situation and the existence of secured and unsecured creditors make it unlikely that Kaplan will recover from ECA.
On March 28, 2016, a class-action lawsuit was filed in the U.S. District Court for the Northern District of Illinois by Erin Fries, a physical therapist formerly employed by Residential, against Residential Home Health, LLC, Residential Home Health Illinois, LLC, and David Curtis. The complaint alleges violations of the Fair Labor Standards Act and the Illinois minimum wage law. The complaint seeks damages, attorney’s fees and costs. At this time, the Company cannot predict the outcomePart II of this matter.Annual Report, which is incorporated herein by reference.
In August 2017, the Pennsylvania Department of Health cited Celtic Healthcare of Westmoreland, LLC for being out of compliance with four conditions of the Medicare Conditions of Participation between August 7, 2017, and September 6, 2017. Celtic Healthcare of Westmoreland, LLC d/b/a Allegheny Health Network Healthcare@Home Home Health (“AHN H@H Home Health”) is a wholly owned subsidiary of a joint venture between West Penn Allegheny Health System, Inc. and Celtic Healthcare, Inc. In light of this 31-day period of non-compliance, the Department of Health issued a provisional license for AHN H@H Home Health. Following a re-survey investigation by the Pennsylvania Department of Health, on January 12, 2018, the Department of Health removed the provisional license assigned to AHN H@H Home Health and restored its unrestricted license. The Pennsylvania Department of Health will alert the Centers for Medicare and Medicaid Services (CMS) about this matter. CMS has the authority to impose civil monetary penalties of up to $10,000 per day or per instance for non-compliance. At this time, the Company cannot predict the outcome of this matter.
Her Majesty’s Revenue and Customs (HMRC), a department of the U.K. government responsible for the collection of taxes, has raised assessments against the Kaplan U.K. Pathways business for Value Added Tax (VAT) relating to 2017 and earlier years, which have been paid by Kaplan. In September 2017, in a case captioned Kaplan International Colleges UK Limited v. The Commissioners for Her Majesty’s Revenue and Customs, Kaplan challenged these assessments. The Company believes it has met all requirements under U.K. VAT law and expects to recover the £15.4 million receivable related to the assessments and subsequent payments that have been paid. Following a hearing held in January 2019, before the First Tier Tax Tribunal, all issues related to EU law in the case were referred to the Court of Justice of the European Union.
The Company and its subsidiaries are also subject to complaints and administrative proceedings and are defendants in various other civil lawsuits that have arisen in the ordinary course of their businesses, including contract disputes; actions alleging negligence, libel, defamation, invasion of privacy; trademark, copyright and patent infringement; False Claims Act violations; violations of employment laws and applicable wage and hour laws; and statutory or common law claims involving current and former students and employees. While it is not possible to predict the outcomes of these lawsuits, in the opinion of management, their ultimate dispositions should not have a material adverse effect on the Company’s business, financial condition, results of operations or cash flows.
Item 4. Mine Safety Disclosures.
Not applicable.


PART II
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information and Holders
The Company’s Class B Common Stock is traded on the New York Stock Exchange under the symbol “GHC.” The Company’s Class A Common Stock is not publicly traded.
At January 31, 2019,2022, there were 27 holders of record of the Company’s Class A Common Stock and 392339 holders of record of the Company’s Class B Common Stock.
Securities Authorized for Issuance Under Equity Compensation Plans
41

The following table and the footnote thereto set forth certain information as of December 31, 2018, concerning compensation plans of the Company under which equity securities of the Company are authorized to be issued.
 
Number of Securities
to Be Issued Upon
Exercise of
Outstanding Options,
Warrants and Rights
 
Weighted Average
Exercise Price of
Outstanding Options,
Warrants and Rights
 Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a))
Plan Category(a) (b) (c)
Equity compensation plans approved by security holders184,932 $566.55 
Equity compensation plans not approved by security holders  
Total184,932 $566.55 

____________
This table does not include information relating to restricted stock grants awarded under the Graham Holdings Company’s Incentive Compensation Plan, which plan has been approved by the stockholders of the Company. At December 31, 2018, there were 15,850 shares of restricted stock outstanding under the 2015–2018 Award Cycle and 13,250 shares of restricted stock outstanding under the 2017–2020 Award Cycle that had been awarded to employees of the Company and its subsidiaries under that Plan. In addition, the Company has from time to time awarded special discretionary grants of restricted stock to employees of the Company and its subsidiaries. At December 31, 2018, there were a total of 3,100 shares of restricted stock outstanding under special discretionary grants approved by the Compensation Committee of the Board of Directors. At December 31, 2018, a total of 437,077 shares of restricted stock and stock options were available for future awards.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
During the quarter ended December 31, 2018,2021, the Company purchased shares of its Class B Common Stock as set forth in the following table:
Period
Total Number
of Shares
Purchased
 
Average
Price Paid
per Share
 
Total Number of Shares
Purchased as Part of
Publicly Announced Plan*
 Maximum Number of Shares That May Yet Be Purchased Under the Plan*PeriodTotal Number
of Shares
Purchased
Average
Price Paid
per Share
Total Number of Shares
Purchased as Part of
Publicly Announced Plan*
Maximum Number of Shares That May Yet Be Purchased Under the Plan*
2018       
20212021
October11,570
 $579.44
 11,570
 274,455
October12,730 $601.02 12,730 314,910 
November800
 596.31
 800
 273,655
November12,957 597.04 12,957 301,953 
December
 
 
 273,655
December31,771 580.93 31,771 270,182 
Total12,370
 $580.53
 12,370
  Total57,458 $589.01 57,458 
____________
*On November 9, 2017,September 10, 2020, the Company’s Board of Directors authorized the Company to purchase, on the open market or otherwise, up to 500,000 shares of its Class B Common Stock. This authorization included the 163,237 shares that remained under the previous authorization. There is no expiration date for thatthis authorization. All purchases made during the quarter ended December 31, 2018,2021, were open market transactions.
Performance Graph
The following graph is a comparison of the yearly percentage change in the Company’s cumulative total shareholder return with the cumulative total return of the Standard & Poor’s 500 Stock Index and a custom peer group index comprised of a composite group of education and television broadcasting companies. Given changes in our mix of operating divisions as a result of acquisitions and dispositions, the Company is changing its custom peer group index this year to include companies that operate in its two largest businesses. The Standard & Poor’s 500 Stock Index is comprised of 500 U.S. companies in the industrial, transportation, utilities and financial industries and is weighted by market capitalization. The custom peer group of composite companies includes Adtalem Global Education Inc., Chegg, Inc., The E.W. Scripps Company, Grand Canyon Education Inc., Meredith Corporation,Nexstar Media Group Inc., Gray Television Inc., New Oriental Education & Technology Group Inc., Pearson plc Tegna Inc. and Tribune Media Company. In prior years, the Company used a custom peer group of education companies, including Adtalem Global Education Inc., American Public Education, Inc., Bridgepoint Education, Inc., Capella Education Co., Grand Canyon Education Inc., National American University Holdings, Inc. and Strayer Education,Tegna Inc. The graph reflects the investment of $100


on December 31, 2013,2016, in the Company’s Class B Common Stock, the Standard & Poor’s 500 Stock Index the custom peer group of composite companies and the custom peer group index of educationcomposite companies. For purposes of this graph, it has been assumed that dividends were reinvested on the date paid in the case of the Company, and on a quarterly basis in the case of the Standard & Poor’s 500 Index and the custom peer group index of composite companies, and the custom peer group index of education companies.
stockgraph2018composite.jpgghc-20211231_g1.jpg
December 31201620172018201920202021
Graham Holdings Company100.00 110.05 127.41 128.13 108.51 129.40 
S&P 500 Index100.00 121.83 116.49 153.17 181.35 233.41 
Composite Peer Group100.00 140.02 131.41 173.42 229.65 116.07 
42
December 312013 2014 2015 2016 2017 2018
Graham Holdings Company100.00
 132.20
 124.23
 132.48
 145.79
 168.80
S&P 500 Index100.00
 113.69
 115.26
 129.05
 157.22
 150.33
Composite Peer Group100.00
 91.93
 73.21
 80.79
 114.50
 106.19
Education Peer Group100.00
 114.14
 76.33
 107.82
 137.50
 152.09


Item 6. Selected Financial Data.Reserved.
See the information for the years 2014 through 2018 contained in the table titled “Five-Year Summary of Selected Historical Financial Data,” which is included in this Annual Report on Form 10-K and listed in the index to financial information on page 37 hereof (with only the information for such years to be deemed filed as part of this Annual Report on Form 10-K).
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
See the information contained under the heading “Management’s Discussion and Analysis of Results of Operations and Financial Condition,” which is included in this Annual Report on Form 10-K and listed in the index to financial information on page 3749 hereof.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
The Company is exposed to market risk in the normal course of its business due primarily to its ownership of marketable equity securities, which are subject to equity price risk; to its borrowing and cash-management activities, which are subject to interest rate risk; and to its non-U.S. business operations, which are subject to foreign exchange rate risk.
Equity Price Risk.The Company has common stock investments in several publicly traded companies (as discussed in Note 4 to the Company’s Consolidated Financial Statements) that are subject to market price volatility. The fair value of these common stock investments totaled $496.4$810.0 million at December 31, 2018.2021.


Interest Rate Risk.The Company’s long-term debt primarily consistsCompany manages the risk associated with interest rate movements through the use of a combination of variable and fixed-rate debt.
At December 31, 2021, the Company had $400 million principal amount of 5.75% unsecured fixed-rate notes due June 1, 2026 (the Notes). At December 31, 2018,2021, the aggregate fair value of the Notes, based upon quoted market prices, was $406.7$417.5 million. An increase in the market rate of interest applicable to the Notes would not increaseThere were no earnings or liquidity risks associated with the Company’s interest expense with respect to the Notes since the rate of interest the Company is required to pay on the Notes is fixed, but such an increase in rates would affect theNotes. The fair value of the Notes. Assuming, hypothetically, that theNotes varies with fluctuations in market interest rate applicable to the Notes wasrates. A 100 basis points higher than the Notes’ statedpoint decrease in market interest rate of 5.75%,rates would increase the fair value of the Notes by $9.5 million at December 31, 2018, would have been approximately $382.1 million. Conversely, if the2021 using a yield to par call. A 100 basis point increase in market interest rate applicable to the Notes was 100 basis points lower than the Notes’ stated interest rate,rates would decrease the fair value of the Notes by $9.3 million at such date would have beenDecember 31, 2021, using a yield to par call. The Company also had approximately $418.9 million.$13 million of other fixed-rate debt, primarily relating to the healthcare business (as discussed in Note 11 to the Company’s Consolidated Financial Statements).
On July 25, 2016, Kaplan borrowed £75At December 31, 2021, the Company had approximately $290 million under the Kaplan Credit Agreement. On the same date, Kaplan entered intoof variable-rate debt, including floor plan facility obligations. Approximately $24.6 million of this debt is hedged by an interest rate swap agreement with a total notional value of £75 million and a maturity date of July 1, 2020. The interest rate swap agreement will pay Kaplan variable interest on the £75 million notional amount at the three-month LIBOR, and Kaplan will pay the counterparties a fixed rate of 0.51%, effectively resulting in a total fixed interest rate of 2.01% on the outstanding borrowings at the current applicable margin of 1.50%. The interest rate swap agreement was entered into to convert the variable rate British pound borrowing under the Kaplan Credit Agreement into a fixed rate borrowing.swap. The Company provided a guarantee on any borrowings under the Kaplan Credit Agreement. Based on the terms ofis subject to earnings and liquidity risks for changes in the interest rate swap agreement andon the underlying borrowing, the interest rate swap agreement was determined to be effective, and thus qualifies as a cash flow hedge. As such, changesunhedged portion of this debt. A 100 basis point increase in the fair valueapplicable floating rates for the unhedged portions of theour variable-rate debt would increase annual interest rate swap are recorded in other comprehensive income on the accompanying Consolidated Balance Sheets until earnings are affectedexpense by the variability of cash flows.approximately $2.6 million.
Foreign Exchange Rate Risk.The Company is exposed to foreign exchange rate risk primarily at its Kaplan international operations, and the primary exposure relates to the exchange rate between the U.S. dollar and the British pound, the Australian dollar, and the Singapore dollar. In 2018,2021, 2020 and 2019 the Company reported net foreign currency losses of $3.8 million. In 2017, the Company reported foreign currency gains of $3.3 million. In 2016, the Company reported unrealized foreign currency losses of $39.9$0.2 million, largely as a result of the decline in the British pound currency in 2016; this includes a realized $16.5$2.2 million loss related to a British pound intercompany advance made in the first quarter of 2016 related to Kaplan’s U.K. acquisitions that has been repaid. In the third quarter of 2016, certain intercompany loans were capitalized and other intercompany loans were designated as long-term investments.$1.1 million, respectively.
If the values of the British pound, the Australian dollar, and the Singapore dollar relative to the U.S. dollar had been 10% lower than the values that prevailed during 2018,2021, the Company’s pre-tax income for 20182021 would have been approximately $9$13 million lower. Conversely, if such values had been 10% higher, the Company’s reported pre-tax income for 20182021 would have been approximately $9$13 million higher.
Item 8. Financial Statements and Supplementary Data.
See the Company’s Consolidated Financial Statements at December 31, 2018,2021, and for the periods then ended, together with the report of PricewaterhouseCoopers LLP thereon, and the information contained in Note 20 to said Consolidated Financial Statements titled “Summary of Quarterly Operating Results and Comprehensive Income (Unaudited),” which are included in this Annual Report on Form 10-K and listed in the index to financial information on page 3749 hereof.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
Not applicable.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
An evaluation was performed by the Company’s management, with the participation of the Company’s Chief Executive Officer (the Company’s principal(principal executive officer) and the Company’s Senior Vice President–Finance (the Company’s principalChief Financial Officer (principal financial officer), of the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)), as of December 31, 2018.2021. Based on that evaluation, the Company’s Chief Executive Officer and Senior Vice President–FinanceChief Financial Officer have concluded that the Company’s disclosure controls and procedures, as
43


designed and implemented, are effective in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and is accumulated and communicated to management, including the Chief Executive Officer and Senior Vice President–Finance,Chief Financial Officer, in a manner that allows timely decisions regarding required disclosure.


Management’s Report on Internal Control Over Financial Reporting
Management of Graham Holdings Company is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)). The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
The Company’s management assessed the effectiveness of internal control over financial reporting as of December 31, 2018.2021. In making this assessment, management used the criteria set forth in Internal Control-IntegratedControl -Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013. Management has concluded that as of December 31, 2018,2021, the Company’s internal control over financial reporting was effective based on these criteria.
The effectiveness of the Company’s internal control over financial reporting as of December 31, 2018,2021, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report included herein.
Changes in Internal Control Over Financial Reporting
There has been no change in the Company’s internal control over financial reporting during the quarter ended December 31, 2018,2021, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
Item 9B. Other Information.
Not applicable.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
The information contained under the heading “Executive Officers” in Item 1 hereof and the information contained under the headings “Nominees for Election by Class A Shareholders,” “Nominees for Election by Class B Shareholders,” “Audit Committee” and “Section 16(a) Beneficial Ownership Reporting Compliance” in the definitive Proxy Statement for the Company’s 20192022 Annual Meeting of Stockholders is incorporated herein by reference thereto.
The Company has adopted codes of conduct that constitute “codes of ethics” as that term is defined in paragraph (b) of Item 406 of Regulation S-K and that apply to the Company’s principal executive officer, principal financial officer, principal accounting officer or controller and to any persons performing similar functions. Such codes of conduct are posted on the Company’s website, the address of which is ghco.com, and the Company intends to satisfy the disclosure requirements under Item 5.05 of Form 8-K with respect to certain amendments to, and waivers of the requirements of, the provisions of such codes of conduct applicable to the officers and persons referred to above by posting the required information on its website.
In addition to the certifications of the Company’s Chief Executive Officer and Chief Financial Officer filed as exhibits to this Annual Report on Form 10-K, on May 9, 2018,20, 2021, the Company’s Chief Executive Officer submitted to the New York Stock Exchange the annual certification regarding compliance with the NYSE’s corporate governance listing standards required by Section 303A.12(a) of the NYSE Listed Company Manual.
Item 11. Executive Compensation.
The information contained under the headings “Director Compensation,” “Compensation Committee Interlocks and Insider Participation,” “Executive Compensation” and “Compensation Committee Report” in the definitive Proxy Statement for the Company’s 20192022 Annual Meeting of Stockholders is incorporated herein by reference thereto.
44


Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The information contained under the heading “Stock Holdings of Certain Beneficial Owners and Management” in the definitive Proxy Statement for the Company’s 20192022 Annual Meeting of Stockholders is incorporated herein by reference thereto.


Item 13. Certain Relationships and Related Transactions and Director Independence.
The information contained under the headings “Transactions With Related Persons, Promoters and Certain Control Persons” and “Controlled Company” in the definitive Proxy Statement for the Company’s 20192022 Annual Meeting of Stockholders is incorporated herein by reference thereto.
Item 14. Principal Accounting Fees and Services.
The information contained under the heading “Audit Committee Report” in the definitive Proxy Statement for the Company’s 20192022 Annual Meeting of Stockholders is incorporated herein by reference thereto.
PART IV
Item 15. Exhibits, Financial Statement Schedules.
The following documents are filed as part of this report:
1.     Financial Statements.As listed in the index to financial information on page 3749 hereof.
2.     Exhibits.As listed in the index to exhibits on page 3446 hereof.
Item 16. Form 10-K Summary.
Not applicable.

45



INDEX TO EXHIBITS
Exhibit NumberDescription
Exhibit Number2.1Description
2.1
3.1
3.2
3.3
4.1
10.14.2
4.3
4.4
10.1
10.2
10.3
10.310.4
10.5
10.410.6
10.5
10.610.7
10.710.8
46


10.8Exhibit NumberDescription
10.9
10.910.10
10.1010.11
10.11
21
23
24
31.1
31.2
32


Exhibit Number101.INSDescriptionInline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCHInline XBRL Taxonomy Extension Schema Document
101
101.CAL
The following financial information from Graham Holdings Company Annual Report on Form 10-K for the year ended December 31, 2018,Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document
101.LABInline XBRL Taxonomy Extension Label Linkbase Document
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document
104Cover Page Interactive Data File, formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Statements of Operations for the years ended December 31, 2018, 2017Inline XBRL and 2016; (ii) Consolidated Statements of Comprehensive Income for the years ended December 31, 2018, 2017 and 2016; (iii) Consolidated Balance Sheetsincluded as of December 31, 2018 and 2017; (iv) Consolidated Statements of Cash Flows for the years ended December 31, 2018, 2017 and 2016; (v) Consolidated Statements of Changes in Common Shareholders’ Equity for the years ended December 31, 2018, 2017 and 2016; and (vi) Notes to Consolidated Financial Statements. Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed “furnished” and not “filed” or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, are deemed “furnished” and not “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability under these sections.Exhibit 101

*A management contract or compensatory plan or arrangement required to be included as an exhibit hereto pursuant to Item 15(b) of Form 10-K.
**Graham Holdings Company hereby undertakes to furnish supplementally a copy of any omitted exhibit or schedule to such agreement to the SEC upon request.
+ Select portions of this exhibit have been omitted pursuant to a request for confidential treatment and have been filed separately with the SEC.




47


SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on February 25, 2019.2022.
 
GRAHAM HOLDINGS COMPANY
(Registrant)
By/s/ Wallace R. Cooney
Wallace R. Cooney
Senior Vice President–FinanceChief Financial Officer
 
 
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on February 25, 2019:2022:
 
Timothy J. O’Shaughnessy
President, Chief Executive Officer
 (Principal Executive Officer) and
Director
Wallace R. Cooney
Senior Vice President–FinanceChief Financial Officer
(Principal Financial Officer)
Marcel A. Snyman
Principal Accounting Officer
Donald E. GrahamChairman of the Board
Lee C. BollingerTony AllenDirector
Christopher C. DavisDirector
Thomas S. GaynerDirector
Jack A. MarkellDirector
Anne M. MulcahyDirector
Larry D. ThompsonDirector
G. Richard Wagoner, Jr.Director
Katharine WeymouthDirector
 
By/s/ Wallace R. Cooney
Wallace R. Cooney
Attorney-in-Fact
 
An original power of attorney authorizing Timothy J. O’Shaughnessy, Wallace R. Cooney and Nicole M. Maddrey, and each of them, to sign all reports required to be filed by the Registrant pursuant to the Securities Exchange Act of 1934 on behalf of the above-named directors and officers has been filed with the Securities and Exchange Commission.

48



INDEX TO FINANCIAL INFORMATION

GRAHAM HOLDINGS COMPANY
 
 Management’s Discussion and Analysis of Results of Operations and Financial Condition (Unaudited)
 Financial Statements:
Report of Independent Registered Public Accounting Firm (PCAOB ID 238)
Consolidated Statements of Operations for the Three Years Ended December 31, 20182021
Consolidated Statements of Comprehensive Income (Loss) for the Three Years Ended December 31, 20182021
Consolidated Balance Sheets at December 31, 20182021 and 20172020
Consolidated Statements of Cash Flows for the Three Years Ended December 31, 20182021
Consolidated Statements of Changes in Common Stockholders’ Equity for the Three Years Ended December 31, 20182021
Notes to Consolidated Financial Statements
 Five-Year Organization and Nature of Operations
Summary of Selected Historical Financial Data (Unaudited)Significant Accounting Policies
Acquisitions and Dispositions of Businesses
Investments
Accounts Receivable, Accounts Payable and Accrued Liabilities
Inventories, Contracts in Progress and Vehicle Floor Plan Payable
Property, Plant and Equipment
Leases
Goodwill and Other Intangible Assets
Income Taxes
Debt
Fair Value Measurements
Revenue From Contracts With Customers
Capital Stock, Stock Awards and Stock Options
Pensions and Other Postretirement Plans
Other Non-Operating Income
Accumulated Other Comprehensive Income (Loss)
Contingencies and Other Commitments
Business Segments

All schedules have been omitted either because they are not applicable or because the required information is included in the Consolidated Financial Statements or the notes thereto referred to above.

49



MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
This analysis should be read in conjunction with the Consolidated Financial Statements and the notes thereto. Refer to Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Graham Holdings Company's 2020 Annual Report on Form 10-K for management’s discussion and analysis of financial condition and results of operations for the year ended December 31, 2020 compared to the year ended December 31, 2019.
OVERVIEW
Graham Holdings Company (the Company) is a diversified education and media company whose operations include educational services; television broadcasting; online, podcast, print and local TV news;news and other content; social-media advertising services; manufacturing; automotive dealerships; restaurants and entertainment venues; custom framing; home health and hospice care; and manufacturing. a consumer internet company. Education is the largest business, and through its subsidiary Kaplan, Inc., the Company provides extensive worldwide education services for individuals, schools and businesses. The Company’s second largest business is television broadcasting. Since November 2012,In 2021, the Company has completed several acquisitions in home health services and manufacturing.an acquisition of a consumer internet company. The Company’s business units are diverse and subject to different trends and risks.
The Company’s education division is the largest operating division of the Company, accounting for 54%43% of the Company’s consolidated revenues in 2018.2021. The Company has devoted significant resources and attention to this division for many years, given its geographic and product diversity; the investment opportunities and growth prospects during this time; and challenges related to government regulation. Kaplan is organized into the following fourthree operating segments: Kaplan International, Kaplan Higher Education (KHE), Kaplan Test Preparation (KTP) and Professional (U.S.).Supplemental Education.
Kaplan International reported revenue increases for 20182021 due largely to growth inat UK Professional and Pathways, enrollments.partially offset by declines at Languages. Kaplan International operating results improved in 20182021 due largely to a reduction in losses at Languages and improved results at English-language, Pathways and UK Professional.
PriorKHE’s revenue grew in 2021, due to an increase in the KaplanPurdue University (KU) Transaction closing on March 22, 2018, Higher Education included Kaplan’s domestic postsecondary education business, made up of fixed-facility collegesGlobal (Purdue Global) fee recorded and online postsecondary and career programs. Following the KU Transaction closing, the Higher Education division includes the results as a service provider toan increase in revenue from other higher education institutions.
KHE’s revenue declinedinstitutions. KHE recorded $34.8 million and $31.6 million in 2018, largely due to the sale of Kaplan University and fewer average enrollments prior to the sale. KHE recorded $16.8 million of service fee withfees from Purdue Global in its Higher Education operating results in 2018,2021 and 2020, respectively, based on an assessment of its collectability under the Transition and Operations Support Agreement (TOSA). Each quarter, the Company assesses the collectability of the service fee with Purdue Global to make a determination as to whether to record all or part of the service fee and whether to make adjustments to service fee amounts recognized
Supplemental Education revenues decreased in earlier periods.
KTP revenues declined in 20182021 due to reduceda decline in retail comprehensive test preparation demand forand classroom-based course offerings, offset in part by growth in securities, insurance and the disposition of Dev Bootcamp. Operating resultsreal estate programs. Supplemental Education operating income improved in 2021 due primarily to decreased lossessavings from the new economy skills training programs.
Professional (U.S.) revenues and operating results were uprestructuring activities implemented in 2018, due primarily to two acquisitions that closed in May and July of 2018.2020.
Kaplan made five acquisitions in 2018; two acquisitions in 2017;2021; two acquisitions in 2020; and threeone acquisition in 2016, including Mander Portman Woodward, a leading provider of high-quality bespoke education to the United Kingdom (U.K.) and international students in London, Cambridge and Birmingham.2019.
The Company’s television broadcasting division reported higherlower revenues and operating income in 2018,2021, due to increasessignificant decreases in political advertising, partially offset by increased local and national advertising revenues, which were adversely impacted in 2020 by reduced demand related to the COVID-19 pandemic, increased retransmission revenues, and increased revenue retransmission revenue, and winterfrom summer Olympics-related advertising revenue at the Company’s NBC stations.affiliates. In recent years, the television broadcasting division has consistently generated significantly higher operating income amounts and operating income margins than the education division and other businesses.
The Company’s manufacturing division has provided meaningful operating cash flow over the last few years, despite reduced demand due to the COVID-19 pandemic at certain businesses. The Company’s healthcare business has grown substantially over the last few years due to internal growth and acquisitions, with a meaningful increase in operating results in the past two years.
With the recent acquisitions of Leaf, Framebridge, three automotive dealerships and Clyde’s Restaurant Group, and recent acquisitions at healthcare and manufacturing, acquisitions and the recent acquisition at SocialCode, the Company has invested in new lines of business from late 2012 through 2018. The Company also has three investment stage businesses - Panoply, Pinna and CyberVista.in the last few years.
The Company generates a significant amount of cash from its businesses that is used to support its operations, pay down debt and fund capital expenditures, share repurchases, dividends, acquisitions and other investments.


RESULTS OF OPERATIONS — 2018 COMPARED TO 2017
Net income attributable to common shares was $271.2$352.1 million ($50.2070.45 per share) for the year ended December 31, 2018,2021, compared to $302.0$300.4 million ($53.8958.13 per share) for the year ended December 31, 2017. 2020.
50


The COVID-19 pandemic and measures taken to prevent its spread significantly impacted the Company’s results for 2017 include2020 and 2021, largely from reduced demand for the Company’s products and services. This significant adverse impact is expected to continue into 2022, although at a significant net deferred income tax benefit relatedreduced level. The Company’s management has taken a variety of measures to reduce costs and to implement changes to business operations. The Company cannot predict the Tax Cutsseverity or duration of the pandemic, the extent to which demand for the Company’s products and Jobs Act legislation enacted in December 2017.services will be adversely affected or the degree to which financial and operating results will be negatively impacted.
Items included in the Company’s net income for 20182021 are listed below:
a $7.9$3.9 million intangible asset impairment charge at the healthcare business (after-tax impact of $5.8 million, or $1.08 net credit related to fair value changes in contingent consideration from prior acquisitions ($0.78 per share);
a $3.9$1.0 million reduction to operating expenses from property, plant and equipment gains in connection with the spectrum repacking mandate of the Federal Communications Commission (FCC) (after-tax(after-tax impact of $3.0$0.8 million,, or $0.55$0.16 per share);
$31.6 million in goodwill and other long-lived asset impairment charges (after-tax impact of $26.0 million, or $5.19 per share);
$6.212.6 million in net earnings of affiliates whose operations are not managed by the Company (after-tax impact of $9.3 million, or $1.86 per share);
$4.1 million in interest expense related to adjust the settlementfair value of athe mandatorily redeemable noncontrolling interest ($1.14 per share);
$11.4 million in debt extinguishment costs (after-tax impact of $8.6$4.0 million,, or $1.60$0.80 per share);
a $30.31.1 million settlement gain in expenses related to a bulk lump sum pension offering and curtailment gain related to changes in the Company’s postretirement healthcare benefit plannon-operating Separation Incentive Program (SIP) at manufacturing (after-tax amountimpact of $22.2$0.8 million,, or $4.11$0.16 per share);
$15.8243.1 million in net lossesgains on marketable equity securities (after-tax impact of $12.6$179.7 million,, or $2.33$35.96 per share);
non-operating gain,Non-operating gains, net, of $6.7$13.6 million from write-ups, sales write-ups and impairments of cost method and equity method investments and related to sales of land and businesses, including guarantor lease obligations (after-tax impact of $5.7$10.1 million,, or $1.03$2.02 per share);
a $4.3$0.2 million gain on the Kaplan University Transaction (after-tax impact of $1.8 million or $0.33 per share);
$3.8 million in non-operating foreign currency losses (after-tax impact of $2.9$0.1 million,, or $0.54$0.03 per share);
and
a nonrecurring discrete $17.8$17.2 million deferred tax benefit arising from a change in the estimated deferred state income tax benefitrate related to the release of valuation allowances ($3.31Company’s pension and other postretirement plans ($3.45 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 20172020 are listed below:
$10.027.9 million in restructuringgoodwill and non-operating Separation Incentive Programother long-lived asset impairment charges (after-tax impact of $20.2 million, or $3.92 per share);
$16.1 million in restructuring charges at the education division (after-tax impact of $6.3$11.9 million,, or $1.12$2.31 per share)share);
a $9.25.7 million goodwill and other long-lived asset impairment charge in accelerated depreciation at one of the manufacturingother businesses (after-tax impact of $5.8$4.1 million,, or $1.03$0.80 per share);
a $2.9 million reduction to operating expenses from property, plant and equipment gains in connection with the spectrum repacking mandate of the FCC (after-tax impact of $2.3 million, or $0.44 per share);
$3.32.1 million in net losses of affiliates whose operations are not managed by the Company (after-tax impact of $1.6 million, or $0.31 per share);
$8.5 million in interest expense in the fourth quarter to adjust the fair value of the mandatorily redeemable noncontrolling interest ($1.64 per share);
$11.5 million in expenses related to non-operating SIP activity at the education division and other businesses (after-tax impact of $8.5 million, or $1.64 per share);
$60.8 million in net gains on marketable equity securities (after-tax impact of $44.7 million, or $8.64 per share);
a fourth quarter gain of $209.8 million on the sale of Megaphone (after-tax impact of $154.2 million, or $29.84 per share);
Non-operating losses, net, of $1.5 million from impairments, sales and write-ups of cost and equity method investments (after-tax impact of $1.1 million, or $0.21 per share);
$2.2 million in non-operating foreign currency gainslosses (after-tax impact of $2.1$1.6 million, or $0.37 per share);
$177.5 millionin net deferred tax benefits related to the enactment of the Tax Cuts and Jobs Act in December 2017 ($31.68$0.31 per share); and
$5.92.9 million in income tax benefitsexpense related to stock compensation ($1.06($0.56 per share).
51


Revenue for 20182021 was $2,696.0$3,186.0 million, up 4%10% from $2,591.8$2,889.1 million in 2017.2020. Revenues increased at the television broadcastingeducation, manufacturing, healthcare, automotive and manufacturing divisions,other businesses, partially offset by a declinedecrease at the education division.television broadcasting. Operating costs and expenses for the year decreased slightlyincreased to $2,449.8$3,108.6 million in 2018,2021, from $2,455.4$2,788.7 million in 2017.2020. Expenses in 2018 decreased at the education division, offset by increases at the manufacturing and television broadcasting2021 increased across all divisions. The Company reported operating income for 20182021 of $246.2$77.4 million, an increase of 80%, from $136.4compared to $100.4 million in 2017.2020. Operating results improveddeclined at most of the Company’s divisions in 2018.television broadcasting and manufacturing, partially offset by improvements at education and automotive.
On April 27, 2017, certain subsidiaries of Kaplan, Inc. (Kaplan), a subsidiary of Graham Holdings Company entered into a Contribution and Transfer Agreement (Transfer Agreement) to contribute the institutional assets and operations of Kaplan University (KU) to an Indiana non-profit, public-benefit corporation that is a subsidiary affiliated with Purdue University (Purdue). The closing of the transactions contemplated by the Transfer Agreement occurred on March 22, 2018. At the same time, the parties entered into a TOSA pursuant to which Kaplan provides key non-academic operations support to the new university. The new university operates largely online as an Indiana public university affiliated with Purdue under the name Purdue University Global (Purdue Global).


Division Results
Education Division.  
Education division revenue in 20182021 totaled $1,451.0$1,361.2 million, downup 4% from $1,516.8$1,305.7 million in 2017.
2020. Kaplan reported operating income of $97.1$50.6 million for 2018, a 25%2021, an increase from $77.7$11.6 million in 2017. In 2018,2020. The COVID-19 pandemic adversely impacted Kaplan’s operating results increasedbeginning in February 2020 and continued through 2021.
Kaplan serves a large 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 significant 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, negatively impacting Kaplan’s exam preparation education businesses. Overall, if COVID-19 restrictions persist, then Kaplan’s revenues and operating results in 2022 could be adversely impacted, particularly at Kaplan International Languages.
To help mitigate the adverse impact of COVID-19, Kaplan implemented a number of cost reduction and restructuring activities across its businesses. Related to these restructuring activities, for 2021, Kaplan recorded $3.3 million in lease impairment charges (including $1.9 million in property, plant and equipment write-downs). In 2020, Kaplan recorded $13.5 million in lease restructuring costs (including $3.6 million of accelerated depreciation expense) and $6.2 million in severance restructuring costs. Kaplan also recorded $12.3 million in lease impairment charges in connection with these plans in 2020 (including $2.2 million in property, plant and equipment write-downs). Further, Kaplan recorded $12.8 million in non-operating pension expense in 2020 related to workforce reductions completed in the second and third quarters.
In 2020, Kaplan also accelerated the 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 while simultaneously adding important new product offerings and operating capabilities. Further, in the fourth quarter of 2020, Kaplan combined its three primary divisions based in the United States (Kaplan Test Prep, Kaplan Professional, and Kaplan Higher Education) into one business known as Kaplan North America (KNA). This combination was designed to enhance Kaplan’s competitiveness by better leveraging its diversified academic and professional portfolio, as well as its relationships with students, universities and businesses. For financial reporting purposes, KNA is reported in two segments: Higher Education and Supplemental Education (combining Kaplan Test PreparationPrep and Kaplan Professional (U.S.), partially offset by decreased results at Higher Education.
In recent years, Kaplan has formulated and implemented restructuring plans at its various businesses that have resulted in restructuring costs, with the objective of establishing lower cost levels in future periods. There were no significant restructuring charges during 2018. Across all businesses, restructuring costs totaled $9.1 million in 2017.
As a result of the KU Transaction that closed on March 22, 2018, the Company has revised the financial into one reporting for its education division to provide operating results for Higher Education and Professional (U.S.)segment).
A summary of Kaplan’s operating results is as follows:
Year Ended December 31
(in thousands)20212020% Change
Revenue   
Kaplan international$726,875 $653,892 11 
Higher education317,854 316,095 
Supplemental education309,069 327,087 (6)
Kaplan corporate and other14,759 12,643 17 
Intersegment elimination(7,312)(4,004)— 
 $1,361,245 $1,305,713 
Operating Income (Loss)   
Kaplan international$33,457 $15,248 — 
Higher education24,134 24,364 (1)
Supplemental education36,919 19,705 87 
Kaplan corporate and other(24,715)(18,266)(35)
Amortization of intangible assets(16,001)(17,174)
Impairment of long-lived assets(3,318)(12,278)73 
Intersegment elimination97 — 
 $50,573 $11,604 — 
52


 Year Ended December 31  
(in thousands)2018 2017 % Change
Revenue     
Kaplan international$719,982
 $697,999
 3
Higher education342,085
 431,425
 (21)
Test preparation256,102
 273,298
 (6)
Professional (U.S.)134,187
 115,839
 16
Kaplan corporate and other1,142
 294
 
Intersegment elimination(2,483) (2,079) 
 $1,451,015
 $1,516,776
 (4)
Operating Income (Loss) 
  
  
Kaplan international$70,315
 $51,623
 36
Higher education15,217
 16,719
 (9)
Test preparation19,096
 11,507
 66
Professional (U.S.)28,608
 27,558
 4
Kaplan corporate and other(26,702) (24,701) (8)
Amortization of intangible assets(9,362) (5,162) (81)
Intersegment elimination(36) 143
 
 $97,136
 $77,687
 25
Kaplan International includes English-language programs and postsecondary education, professional training and professionallanguage training businesses largely outside the United States. Kaplan International revenue increased 3%11% in 2018, and2021 (5% on a constant currency basis, revenue increased 1%, primarily due to growth in Pathways enrollments. Kaplan International operating income increased 36% in 2018,basis). The increase is due largely to growth at UK Professional and Pathways, partially offset by declines at Languages. Kaplan International reported operating income of $33.5 million in 2021, compared to $15.2 million in 2020. The increase in operating results is due to a reduction in losses at Languages and improved results at English-language, Pathways and UK Professional.Restructuring costs at Overall, Kaplan International totaled $2.9International’s operating results were negatively impacted by $43 million and $55 million in 2017.losses, respectively, incurred at Languages from continued significant COVID-19 disruptions in 2021 and 2020. In addition, Kaplan International’s 2020 results include $4.5 million of lease restructuring costs (including $1.6 million in accelerated depreciation expense) and $4.4 million of severance restructuring costs. If a continuation of travel restrictions imposed as a result of COVID-19 persists, Kaplan expects the disruption of its Languages business operating environment to continue into 2022.
Prior to the KU Transaction closing on March 22, 2018, Higher Education included Kaplan’s domestic postsecondary education business, made up of fixed-facility colleges and online postsecondary and career programs. Following the KU Transaction closing, the Higher Education divisionprimarily includes the results of Kaplan as a service provider to higher education institutions.
In 2018,2021, Higher Education revenue declined 21%increased 1% due largely to an increase in the salePurdue Global fee recorded and an increase in revenue from other higher education institutions. In 2021 and 2020, Kaplan recorded a portion of KU on March 22, 2018 and fewer average enrollments at KU prior to the sale. The Company recorded $16.8 million of service fee with Purdue Global in its Higher Education operating results in 2018, based on an assessment of its collectability under the TOSA. Each quarter, theTOSA. The Company assesseswill continue to assess the collectability of the service fee with Purdue Global on a quarterly basis to make a determination as to whether to record all or part of the service fee in the future and whether to make adjustments to service fee amounts recognized in earlier periods. Restructuring costs at During 2021 and 2020, Kaplan recorded $34.8 million and $31.6 million, respectively, in fees from Purdue Global in its Higher Education were $1.4operating results. Kaplan Higher Education recorded $3.6 million for 2017.in lease restructuring costs in 2020, of which $0.2 million was accelerated depreciation expense.
KTPSupplemental Education includes Kaplan’s standardized test preparation programs. In September 2018, KTP acquired the test preparationprograms and study guide assets of Barron’s Educational Series, a New York-based education publishing company. KTP revenue declined 6% in 2018 due to reduced demand for classroom-based offerings, and the disposition of Dev Bootcamp, which made up the majority of KTP’s new economy skills training programs, offset in part by growth in online-based programs. KTP operating results improved in 2018 due primarily to decreased losses from the new economy skills training programs. Operating losses for the new economy skills training programs were $3.6 million and $16.7 million for 2018 and 2017, respectively, including restructuring costs incurred in connection with the closing of Dev Bootcamp that was completed in the second half of 2017. Excluding losses from the new economy skills training programs, KTP operating results were down in 2018, due primarily to revenue declines for classroom-based offerings.


Kaplan Professional (U.S.) includes the domestic professional and other continuing education businesses. In 2018, Kaplan Professional (U.S.)November 2021, Supplemental Education acquired two small businesses. Supplemental Education revenue decreased 6% in 2021 due to a decline in retail comprehensive test preparation demand and classroom-based course offerings, offset in part by growth in securities, insurance and real estate programs. Operating results increased 87% in 2021 due to savings from restructuring activities implemented in 2020, and $5.4 million of lease restructuring costs ($1.8 million of which was up 16% due primarily to the May 2018 acquisition of Professional Publications, Inc. (PPI), an independent publisher of professional licensing exam review materials that provides engineering, surveying, architecture,accelerated depreciation) and interior design licensure exam review products, and the July 2018 acquisition of College for Financial Planning (CFFP), a provider of financial education and training to individuals through programs of study for professionals pursuing a career$1.8 million in Financial Planning. Kaplan Professional (U.S.) operating results improved 4%severance restructuring costs incurred in 2018, due mostly to income from PPI and CFFP, offset by increased spending on sales, marketing and technology.2020.
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 increased in 2021 due to normalization of compensation costs compared to 2020, which included salary abatements and reduced incentive compensation accruals.
Television Broadcasting Division. 
A summary of television broadcasting’s operating results is as follows:
  Year Ended December 31  
(in thousands)20212020% Change
Revenue$494,177 $525,212 (6)
Operating Income149,422 194,498 (23)
Revenue at the television broadcasting division increased 23%decreased 6% to $505.5 millionin 2018, from $409.9$494.2 million in 2017.2021, from $525.2 million in 2020. The revenue increasedecrease is due to an $89.0 million decline in political advertising revenue, partially offset by increased local and national advertising revenues, which were adversely impacted in 2020 by reduced demand related to the COVID-19 pandemic, a $64.9$12.3 million increase in political advertising revenue,$38.0 million in higher retransmission revenues, $8.6 million in 2018 incremental winterand increased revenue from summer Olympics-related advertising revenue at the Company’s NBC stations,affiliates. The increase in local and the adverse impactnational television advertising was from hurricanes Harvey and Irma growth in the third quarter of 2017. Operating income for 2018 was up 51% to $210.5 million, from $139.3 million in 2017, due to higher revenues.
home products, health and fitness, and sports betting categories. In 2018,2021 and 2020, the television broadcasting division recorded $3.9$1.0 million and $2.9 million, respectively, in reductions to operating expenses related to non-cash property, plant and equipment gains due to new equipment received at no cost in connection with the spectrum repacking mandate of the FCC. Operating income for 2021 was down 23% to $149.4 million, from $194.5 million in 2020, due to reduced revenues and higher network fees. While per subscriber rates from cable and satellite providers have grown, overall cable and satellite subscribers are down due to cord cutting, resulting in low growth in retransmission revenue net of network fees in 2021, which is expected to continue in the future.
Operating margin at the television broadcasting division was 42%30% in 20182021 and 34%37% in 2017.2020.
The Company’s televisionGraham Media Group’s broadcast stations continue to deliverremained well-positioned and competitive audience ratings and are well-positioned in their markets.markets, despite overall viewing declines from a heightened 2020. On average for the year, KPRC in Houston, KSAT in San Antonio and WJXT in Jacksonville once again ranked number one in the key 6am, 6pm6 a.m., 6 p.m. and late newscasts among the criticalall-important 25 to 54 demographic. WDIV in Detroit ended the year as a soliddominant number one at 6pm6 p.m. and 11pm andin late news, while number two in the mornings. KPRC wrapped up 2021 as a solid number two in evening and late newscasts, third at
53


6 a.m. with minimal separation from competitors. WKMG grew market position in Orlandomorning and late news, finishing number two while remaining third at 6 p.m. WSLS in Roanoke rankedremained third in their respective markets,key newscasts for the year, while WCWJ in Jacksonville successfully foundsyndication remained a niche with their strong syndicated programming lineupstrength for WCWJ in daytime and early fringe. Our local station’s websites finished another year as the number one media sites in their respective markets.
Healthcare.  Graham Healthcare Group (GHG) provides home health and hospice services in three states. At the end of June 2017, GHG acquired Hometown Home Health and Hospice, a Lapeer, MI-based healthcare services provider. Healthcare revenues declined3% in 2018, primarily due to a new management services agreement (MSA) with one of GHG’s joint ventures that was effective in the third quarter of 2018. In the third quarter of 2018, GHG recorded a $7.9 million intangible asset impairment charge related to the Celtic trademark, which was phased out in the second half of 2018. The decline in GHG operating results in 2018 is due to the intangible asset impairment charge and a decline in results from the MSA with one of GHG’s joint ventures, offset by lower bad debt expense and overall cost reductions.

Manufacturing

Other Businesses. A summary of Other Businesses’manufacturing’s operating results for 2018 compared to 2017 is as follows:
   Year Ended December 31 %
(in thousands) 2018 2017 Change
Operating Revenues         
Manufacturing $487,619
 $414,193
 18
SocialCode 58,728
 62,077
 (5)
Other 43,880
 34,733
 26
   $590,227
 $511,003
 16
Operating Expenses   
   
   
Manufacturing $458,768
 $399,246
 15
SocialCode 59,809
 65,751
 (9)
Other 71,896
 65,269
 10
   $590,473
 $530,266
 11
Operating Income (Loss)   
   
   
Manufacturing $28,851
 $14,947
 93
SocialCode (1,081) (3,674) 71
Other (28,016) (30,536) 8
   $(246) $(19,263) 99
Depreciation      
Manufacturing $9,515
 $9,173
 4
SocialCode 797
 1,004
 (21)
Other 1,523
 1,546
 (1)
   $11,835
 $11,723
 1
Amortization of Intangible Assets and Impairment of Goodwill and Other Long-Lived Assets      
Manufacturing $24,746
 $31,052
 (20)
SocialCode 928
 333
 
Other 
 
 
   $25,674
 $31,385
 (18)
Pension Expense   
   
   
Manufacturing $72
 $79
 (9)
SocialCode 723
 593
 22
Other 578
 453
 28
   $1,373
 $1,125
 22
  Year Ended December 31  
(in thousands)20212020% Change
Revenue$458,125 $416,137 10 
Operating (Loss) Income(16,048)12,328 — 
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; Joyce/Dayton, Corp., a manufacturer of screw jacks and other linear motion systems; and Forney, a global supplier of products and systems that control and monitor combustion processes in electric utility and industrial applications; and Hoover Treated Wood Products, Inc., a supplier of pressure impregnated kiln-dried lumber and plywood products for fire retardant and preservative applications that the Company acquired in April 2017. In July 2018, Dekko acquired Furnlite, Inc., a Fallston, NC-based manufacturer of power and data solutions for the hospitality and residential furniture industries.applications.
Manufacturing revenues increased 10% in 2021 due to significantly increased revenues at Hoover from substantially higher wood prices in 2021 and operating income increased in 2018 due largely to the Hoover acquisition. Also,revenues at Joyce/Dayton, partially offset by lower revenues at Forney and declines at Dekko from lower product demand, particularly in the second quarter of 2017, the Company recorded a $9.2commercial office electrical products and hospitality sectors. Wood prices have been highly volatile in 2021 and 2020; overall, Hoover results include gains on inventory sales in 2021 and 2020 from generally increasing wood prices during these years. Manufacturing operating results declined in 2021 due to $28.0 million in goodwill and other long-lived asset impairment charges; $26.7 million of this charge was recorded at Forney, due to lower than expected revenues resulting from sluggish overall demand for its energy products. While Hoover holds inventory for relatively short periods, wood prices declined on a consistent basisDekko in the second half of 2018, resulting in losses on inventory sales.
SocialCode is a provider of marketing solutions on social, mobile and video platforms. In the third quarter of 2018, SocialCode acquired Marketplace Strategy, a Cleveland-based Amazon sales acceleration agency. SocialCode revenue decreased 5% in 2018, resulting from declines in digital advertising service revenues, partly2021, due to continued weakness in demand for certain Dekko products related to the COVID-19 pandemic, increases in labor and commodity costs and related supply chain challenges. Excluding these impairment charges, manufacturing results were down modestly in 2021 due to declines at Dekko and Forney, partially offset by overall improved results at Hoover. The Company’s manufacturing businesses are operating in a transition from agency-based clientshighly competitive market for production labor, resulting in substantial wage increases and higher labor costs in 2021.
In the second quarter of 2021, Dekko announced a plan to direct-relationship clients.SocialCode reported an operating lossrelocate its manufacturing operations in Shelton, CT to other Dekko manufacturing facilities, which was substantially completed by the end of 2021. In connection with this activity, Dekko implemented a SIP for the affected employees, resulting in $1.1 million in 2018 compared to$3.7 million in 2017. SocialCode’s operating results included a credit of $7.1 million related to phantom equity plans in 2018; whereas 2017 results includednon-operating SIP expense of $1.4 million related to phantom equity plans in 2017. Excluding the amounts related to phantom equity plans for the relevant periods, SocialCode results are down in 2018, largely due to revenue declines. As of December 31, 2018, the accrual balance related to these plans was $0.4 million.
Other businesses include Slate and Foreign Policy, which publish online and print magazines and websites; and three investment stage businesses, Panoply, Pinna and CyberVista. Revenues increased 26% in 2018 largely due to growth at Panoply. Losses from each of these businesses in 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 December 31, 2018, the Company held interests in a number of home health and hospice joint ventures, and interests in several other affiliates. During 2017, the Company acquired an approximate 11% interest in Intersection Holdings, LLC, a company that provides digital marketing and advertising services and products for cities, transit systems, airports, and other public and private spaces.In the third quarter of 2018, the Company recorded $7.9 million in gains in earnings of affiliates related to two of its investments. In total, the Company recorded equity in earnings of affiliates of $14.5 million for2018, compared to losses of $3.2 million in 2017.
Net Interest Expense, Debt Extinguishment Costs and Related Balances. On May 30, 2018, the Company issued $400 million of 5.75% unsecured eight-year fixed-rate notes due June 1, 2026. Interest is payable semi-annually on June 1 and December 1. On June 29, 2018, the Company used the net proceeds from the sale of the notes and other cash to repay $400 million of 7.25% notes that were due February 1, 2019. The Company incurred $11.4 million in debt extinguishment costs related to the early termination of the 7.25% notes.
The Company incurred net interest expense of $32.5 million in 2018, compared to $27.3 million in 2017. The Company incurred $6.2 million in interest expense related to the mandatorily redeemable noncontrolling interest at GHG settled in the second quarter of 2018.
At December 31, 2018, the Company had $477.1 million in borrowings outstanding at an average interest rate of 5.1%, and cash, marketable securities and other investments of $778.7 million. At December 31, 2017, the Company had $493.3 million in borrowings outstanding at an average interest rate of 6.3%, and cash, marketable securities and other investments of $964.7 million.
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 required2021, to be applied retroactively, with prior period financial information revised to reflectfunded by 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.
In the fourth quarter of 2018, the Company recorded a $26.9 million gain related to a bulk lump sum pension program offering. Also in the fourth quarter of 2018, the Company made changes to its postretirement healthcare benefit plan, resulting in a $3.4 million curtailment gain. In total, the Company recorded net non-operating pension and postretirement benefit income of $120.5 million in 2018, compared to $72.7 million in 2017.
Loss on Marketable Equity Securities, Net. 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 $15.8 millionin net losses on marketable equity securities in 2018.
Other Non-Operating Income (Expense). The Company recorded total other non-operating income, net, of $2.1 million in 2018, compared to $4.2 millionin 2017. The 2018 non-operating income, net, included $11.7 million in fair value increases on cost method investments; $8.2 million in net gains related to sales of businesses and contingent consideration; a$2.8 milliongain on sale of a cost method investment; a $2.5 million gain on sale of land and other items, partially offset by $17.5 millionin losses on guarantor lease obligations in connection with the 2015 saleassets of the KHE Campuses businesses; $3.8 million in foreign currency losses; and $2.7 millionin impairments on cost method investments. The 2017 non-operating income, net, included $3.3 million in foreign currency gains and other items.Company's pension plan.
Provision for (Benefit From) Income Taxes. The Company’s effective tax rate for 2018 was 16.1%. In the third quarter of 2018, the Company recorded a $17.8 million deferred state tax benefit related to the release of valuation allowances. Excluding this $17.8 million benefit and a $1.8 million income tax benefit related to stock compensation, the overall income tax rate for 2018 was 22.2%. The Tax Cuts and Jobs Act was enacted in December 2017, which included lowering the federal corporate income tax rate from 35% to 21%.Healthcare
The Company reported an income tax benefit of $119.7 million for 2017, which was significantly impacted by the enactment of the Tax Cuts and Jobs Act in December 2017. Overall, the Company recorded a $177.5 million net deferred tax benefit in the fourth quarter of 2017 as a result of enactment of this legislation, due largely to the revaluation of the Company’s U.S. deferred tax assets and liabilities to the lower federal tax rate and a significant reduction in the amount of deferred taxes previously provided on undistributed earnings of investments in non-U.S. subsidiaries. In the first quarter of 2017, the Company recorded a $5.9 million income tax benefit related to the vesting of restricted stock awards in connection with the adoption of 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 the effect of these items, the effective tax rate for 2017 was 34.9%.
Adoption of Revenue Recognition Standard. On January 1, 2018, the Company adopted the new revenue recognition guidance using the modified retrospective approach. In connection with the KU Transaction, Kaplan recognized $4.5 million in service fee revenue and operating income in the third quarter of 2018. Under the previous guidance, this would not have been recognized, as a determination would not have been made until the end of Purdue Global’s fiscal year (June 30, 2019). If the company applied the accounting policies under the previous guidance for all other revenue streams, revenue and operating expenses would have been $1.7 million and $0.6 million lower, respectively, for 2018.
RESULTS OF OPERATIONS — 2017 COMPARED TO 2016
Net income attributable to common shares was $302.0 million ($53.89 per share) for the year ended December 31, 2017, compared to $168.6 million ($29.80 per share) for the year ended December 31, 2016. The Company’s results for 2017 include a significant net deferred income tax benefit related to the Tax Cuts and Jobs Act legislation enacted in December 2017.

Items included in the Company’s net income for 2017 are listed below:
$10.0 million in restructuring and non-operating Separation Incentive Program charges at the education division (after-tax impact of $6.3 million, or $1.12 per share);
a $9.2 million goodwill and other long-lived asset impairment charge at one of the manufacturing businesses (after-tax impact of $5.8 million, or $1.03 per share);
$3.3 million in non-operating foreign currency gains (after-tax impact of $2.1 million, or $0.37 per share);
$177.5 million in net deferred tax benefits related to the enactment of the Tax Cuts and Jobs Act in December 2017 ($31.68 per share); and
$5.9 million in income tax benefits related to stock compensation ($1.06 per share).
Items included in the Company’s net income for 2016 are listed below:
$11.9 million in restructuring charges at the education division (after-tax impact of $7.7 million, or $1.36 per share);
an $18.0 million non-operating gain related to a bulk lump sum pension program offering (after-tax impact of $10.8 million, or $1.92 per share);
$16.8 million in net non-operating gains from the sales of assets and write-downs of cost and equity method investments (after-tax impact of $9.5 million, or $1.62 per share);
$39.9 million in non-operating foreign currency losses (after-tax impact of $25.5 million, or $4.51 per share); and
a net nonrecurring $13.9 million deferred tax benefit related to Kaplan ($2.47 per share).
Revenue for 2017 was $2,591.8 million, up 4% from $2,481.9 million in 2016. Revenues increased in other businesses, offset by a decline at the education division. Operating costs and expenses for the year increased 9% to $2,455.4 million in 2017, from $2,259.0 million in 2016. Expenses were higher due to increased network fees at the television broadcasting division in 2017, and increased expenses at other businesses as a result of the Hoover acquisition, partially offset by lower expenses at the education division due to overall declines in business activity. The Company reported operating income for 2017 of $136.4 million, a decrease of 39%, from $222.9 million in 2016. Operating results declined at the television broadcasting, education and healthcare divisions.
Division Results
Education Division. Education division revenue in 2017 totaled $1,516.8 million, down 5% from $1,598.5 million in 2016. Kaplan reported operating income of $77.7 million for 2017, an 18% decrease from $95.3 million in 2016. In 2017, operating results declined at KHE, partially offset by improved results at KTP, Kaplan International and Professional (U.S.).
In recent years, Kaplan has formulated and implemented restructuring plans at its various businesses that have resulted in restructuring costs in 2017 and 2016, with the objective of establishing lower cost levels in future periods. Across all businesses, restructuring costs totaled $9.1 million in 2017 and $11.9 million in 2016.


A summary of Kaplan’shealthcare’s operating results is as follows:
 Year Ended December 31  
(in thousands)2017 2016 % Change
Revenue     
Kaplan international$697,999
 $696,362
 
Higher education431,425
 501,784
 (14)
Test preparation273,298
 286,556
 (5)
Professional (U.S.)115,839
 115,263
 
Kaplan corporate and other294
 214
 37
Intersegment elimination(2,079) (1,718) 
 $1,516,776
 $1,598,461
 (5)
Operating Income (Loss) 
  
  
Kaplan international$51,623
 $48,398
 7
Higher education16,719
 39,196
 (57)
Test preparation11,507
 9,599
 20
Professional (U.S.)27,558
 27,436
 
Kaplan corporate and other(24,701) (21,763) (13)
Amortization of intangible assets(5,162) (7,516) 31
Intersegment elimination143
 (29) 
 $77,687
 $95,321
 (18)
Kaplan International includes English-language programs and postsecondary education and professional training businesses largely outside the United States. Kaplan International revenue increased slightly in 2017, and on a constant currency basis, revenue increased 2%, primarily due to growth in Pathways enrollments. Kaplan International operating income increased 7% in 2017, due largely to improved Pathways program results, partially offset by a decline in Singapore. Restructuring costs at Kaplan International totaled $2.9 million and $4.7 million in 2017 and 2016, respectively.
KHE includes Kaplan’s domestic postsecondary education businesses, made up of fixed-facility colleges and online postsecondary and career programs.
In 2017, KHE revenue declined 14% due to declines in average enrollments at Kaplan University. KHE operating income declined in 2017 due primarily to lower enrollment at Kaplan University, partially offset by lower restructuring costs. Restructuring costs at KHE were $1.4 million for 2017, compared to $7.1 million for 2016.
New higher education student enrollments at Kaplan University declined 4% in 2017 due to lower demand across Kaplan University programs. Total students at Kaplan University were 28,718 atDecember 31, 2017, down 11% from December 31, 2016.
Kaplan University higher education student enrollments by certificate and degree programs are as follows:
 As of December 31
 2017 2016
Certificate9.5% 7.7%
Associate’s16.5% 18.1%
Bachelor’s50.9% 50.9%
Master’s23.1% 23.3%
 100.0% 100.0%
KTP includes Kaplan’s standardized test preparation and new economy skills training programs. KTP revenue declined 5% in 2017. Enrollments, excluding the new economy skills training offerings, were up 4% in 2017; however, unit prices were generally lower. In comparison to 2016, KTP operating results improved in 2017 due primarily to operating cost efficiencies. Operating losses for the new economy skills training programs were $16.7 million and $13.0 millionfor2017 and 2016, respectively, including restructuring costs incurred in connection with the closing of Dev Bootcamp that was completed in the second half of 2017. Dev Bootcamp made up the majority of KTP’s new economy skills training programs.
Professional (U.S.) includes the domestic professional training and other continuing education businesses. Professional (U.S.) revenues and operating income in 2017 were flat compared to 2016.
Kaplan corporate and other represents unallocated expenses of Kaplan, Inc.’s corporate office, other minor businesses and certain shared activities.


Television Broadcasting Division. On January 17, 2017, the Company closed on its agreement with Nexstar Broadcasting Group, Inc. and Media General, Inc. to acquire WCWJ, a CW affiliate television station in Jacksonville, FL, and WSLS, an NBC affiliate television station in Roanoke, VA, for $60 million in cash and the assumption of certain pension obligations. The Company continues to operate both stations under their current network affiliations.
Revenue at the television broadcasting division increased slightly to $409.9 million in 2017, from $409.7 million in 2016. Excluding revenue from the two newly acquired stations, revenue declined 6% due to a $28.7 million decrease in political advertising revenue, $13.1 million in 2016 incremental summer Olympics-related advertising revenue at the Company’s NBC affiliates, lower network revenue and the adverse impact from hurricanes Harvey and Irma in the third quarter of 2017, partially offset by $20.7 million in increased retransmission revenues. As previously disclosed, the Company’s NBC affiliates in Houston and Detroit are operating under a new contract with NBC effective January 1, 2017 that has resulted in a significant increase in network fees in 2017, compared to 2016. Operating income for 2017 was down 31% to $139.3 million, from $202.9 million in 2016 due to lower revenues, the significantly higher network fees and increased amortization of intangibles expense.
Operating margin at the television broadcasting division was 34% in 2017 and 50% in 2016.
  Year Ended December 31  
(in thousands)20212020% Change
Revenue$223,030 $198,196 13 
Operating Income26,806 26,107 
The Company’s television station ratings remained strong across our markets. On average in the November 2017 ratings period, KPRC in Houston, WDIV in Detroit, KSAT in San Antonio and WJXT in Jacksonville ranked number one in the key 6am, 6pm and late newscasts among target demographic viewers age 25 to 54; WKMG in Orlando ranked number two and WSLS in Roanoke ranked third in key newscasts. WCWJ in Jacksonville demonstrated success with its syndicated programming in daytime and early fringe, ranking number two.
Healthcare. Graham Healthcare Group (GHG) provides home health and hospice services in threefour states. In June 2016, the CompanyDecember 2021, GHG acquired the outstanding 20% redeemable noncontrollingtwo small businesses, one of which expanded GHG’s home health operations into Florida. GHG provides other healthcare services, including nursing care and prescription services for patients receiving in-home infusion treatments through its 75% interest in Residential Healthcare (Residential). Also in June 2016, Celtic Healthcare (Celtic) and Residential combined their business operations and theCSI Pharmacy Holding Company, now owns 90% of the combined entity. The Company incurred approximately $2.0 million in expenses in conjunction with these transactions in the second quarter of 2016. At the end of June 2017, GHG acquired Hometown Home Health and Hospice, a Lapeer, MI-based healthcare services provider.LLC (CSI). Healthcare revenues increased 5%13% in 2017, while2021, largely due to growth at CSI and home health services. The increase in GHG operating results were down,in 2021 is due largely to increased bad debt expensesimproved results from CSI and higher information systems and other integration costs.
In June 2016, Residential and a Michigan hospital formed a joint venture to provide home health services, to West Michigan patients. GHG manages the operations of the joint venture and holds a 40% interest. The pro rata operating results of the joint venture are included in the Company’s equity in earnings of affiliates. In connection with this transaction, the Company recorded a pre-tax gain of $3.2 million in the second quarter of 2016 that is included in other income (expense), net.


Other Businesses. A summary of Other Businesses’ operating results for 2017 compared to 2016 is as follows:
   Year Ended December 31 %
(in thousands) 2017 2016 Change
Operating Revenues         
Manufacturing $414,193
 $241,604
 71
SocialCode 62,077
 58,851
 5
Other 34,733
 26,433
 31
   $511,003
 $326,888
 56
Operating Expenses   
   
   
Manufacturing $399,246
 $228,887
 74
SocialCode 65,751
 71,258
 (8)
Other 65,269
 51,644
 26
   $530,266
 $351,789
 51
Operating Income (Loss)   
   
   
Manufacturing $14,947
 $12,717
 18
SocialCode (3,674) (12,407) 70
Other (30,536) (25,211) (21)
   $(19,263) $(24,901) 23
Depreciation      
Manufacturing $9,173
 $7,251
 27
SocialCode 1,004
 929
 8
Other 1,546
 1,390
 11
   $11,723
 $9,570
 22
Amortization of Intangible Assets and Impairment of Goodwill and Other Long-Lived Assets      
Manufacturing $31,052
 $12,119
 
SocialCode 333
 
 
Other 
 1,687
 
   $31,385
 $13,806
 
Pension Service Cost   
   
   
Manufacturing $79
 $86
 (8)
SocialCode 593
 541
 10
Other 453
 491
 (8)
   $1,125
 $1,118
 1
Manufacturing includes four businesses: Dekko, a manufacturer of electrical workspace solutions, architectural lighting and electrical components and assemblies; Joyce/Dayton Corp., a manufacturer of screw jacks and other linear motion systems; Forney, a supplier of products and systems that control and monitor combustion processes in electric utility and industrial applications; and Hoover Treated Wood Products, Inc., a supplier of pressure impregnated kiln-dried lumber and plywood products for fire retardant and preservative applications that the Company acquired in April 2017. In September 2016, Dekko acquired Electri-Cable Assemblies, a manufacturer of power, data and electrical solutions for the office furniture industry.
In the second quarter of 2017, the Company recorded a $9.2 million goodwill and other long-lived asset impairment charge at Forney, due to lower than expected revenues resulting from sluggish overall demand for its energy products. Excluding this impairment charge, manufacturing revenues and operating income increased in 2017 due to the Hoover acquisition and growth and improved results at Dekko, including the Electri-Cable Assemblies acquisition,partially offset by a decline in results from hospice services. GHG is operating in a highly competitive market for nurses and clinical staffing, resulting in substantial compensation increases in 2021. In certain cases, this challenging competitive market has adversely impacted GHG’s ability to meet existing customer demand.
In the second quarter of 2020, GHG received $7.4 million from the Federal Coronavirus Aid, Relief, and Economic Security Act (CARES Act) Provider Relief Fund. GHG did not apply for these funds; they were disbursed to GHG as a Medicare provider under the CARES Act. Under the Department of Health and Human Services guidelines, these funds may be used to offset revenue reductions and expenses incurred in connection with the COVID-19 pandemic. Of this amount, GHG recorded $5.7 million in revenue in the second and third quarters of 2020, to partially offset the impact of revenue reductions due to the COVID-19 pandemic from the curtailment of elective procedures by health systems and other factors. The remaining amount of $1.7 million was recorded as a credit to operating costs in the
54


second quarter of 2020 to partially offset the impact of costs incurred to procure personal protective equipment for GHG employees and other COVID-19 related costs.
The Company also holds interests in four home health and hospice joint ventures managed by GHG, whose results are included in equity in earnings of affiliates in the Company’s Consolidated Statements of Operations. In 2021 and 2020, the Company recorded equity in earnings of $10.2 million and $9.7 million, respectively, from these joint ventures.
Automotive
A summary of automotive’s operating results is as follows:
  Year Ended December 31  
(in thousands)20212020% Change
Revenue$327,069 $258,144 27 
Operating Income (Loss)11,771 (6,196)— 
Automotive includes four automotive dealerships in the Washington, D.C. metropolitan area: Ourisman Lexus of Rockville, Ourisman Honda of Tysons Corner, Ourisman Jeep Bethesda and Ourisman Ford of Manassas. On December 28, 2021, the Company acquired Ford of Manassas located in Manassas, VA from the Battlefield Automotive Group. Christopher J. Ourisman, a member of the Ourisman Automotive Group family of dealerships, and his team of industry professionals operates and manages the dealerships; the Company holds a 90% stake.
Revenues for 2021 increased 27% due to sales growth at Forney.each of the three legacy dealerships, due partly to significantly reduced demand for sales and service in the first half of 2020 at the onset of the COVID-19 pandemic in March 2020, and higher average new and used car selling prices as a result of strong consumer demand and inventory shortages related to supply chain disruptions and production delays at vehicle manufacturers. In the first quarter of 2020, the Company’s automotive dealerships recorded a $6.7 million intangible asset impairment charge as a result of the pandemic and the related recessionary conditions. Operating results for 2021 improved significantly from the prior year due to increased sales and margins, in addition to the impairment charge recorded in the first quarter of 2020.
SocialCode
Other Businesses
Leaf Group
On June 14, 2021, the Company closed on the acquisition of all outstanding shares of common stock of Leaf Group Ltd. (Leaf) at $8.50 per share in an all cash transaction valued at approximately $322 million. Leaf Group, headquartered in Santa Monica, CA, is a provider of marketing solutions on social, mobileconsumer internet company that builds enduring, creator-driven brands that reach passionate audiences in large and video platforms. SocialCode revenue increased 5%growing lifestyle categories, including fitness and wellness (Well+Good, Livestrong.com and MyPlate App), and home, art and design (Saatchi Art, Society6 and Hunker).
The Leaf operating results for the period June 14, 2021 to December 31, 2021 are included in 2017, due to continued growth in digital advertising service revenues. SocialCodeother businesses. Leaf has three major operating divisions: Society6 Group and Saatchi Art Group (Marketplace businesses) and the Media Group. Overall, Leaf reported an operating loss for the second half of $3.72021.
Clyde’s Restaurant Group
Clyde’s Restaurant Group (CRG) owns and operates eleven restaurants and entertainment venues in the Washington, D.C. metropolitan area, including Old Ebbitt Grill and The Hamilton. As a result of the COVID-19 pandemic, CRG temporarily closed all of its restaurants and venues in March 2020 through mid-June 2020, pursuant to government orders, maintaining limited operations for delivery and pickup. CRG recorded a $9.7 million goodwill and intangible assets impairment charge in the first quarter of 2020. In June 2020, CRG made the decision to close its restaurant and entertainment venue in Columbia, MD effective July 19, 2020, resulting in accelerated depreciation of property, plant and equipment totaling $5.7 million recorded in the second and third quarters of 2020. In December 2020, CRG temporarily closed its restaurant dining rooms in Maryland and the District of Columbia for the second time, reopening again for limited indoor dining service in mid-February 2021. Dining restrictions from government orders were substantially lifted for all of CRG’s operations by the end of the second quarter of 2021.
Overall, CRG incurred significant operating losses in 2021 and 2020 due to limited revenues and costs incurred to maintain its facilities and support its employees; however, the losses incurred in 2021 were significantly lower than the losses in 2020. While CRG operations have been adversely impacted as a result of the pandemic, both revenues and operating results improved substantially in 2021 as the year progressed.
55


Framebridge
On May 15, 2020, the Company acquired Framebridge, Inc., a custom framing service company, headquartered in Washington, D.C., with two retail locations in the D.C. metropolitan area and a manufacturing facility in Richmond, KY. At the end of 2021, Framebridge had fifteen retail locations in the Washington, D.C., New York City, Atlanta, GA, Philadelphia, PA, Boston, MA and Chicago, IL areas and three manufacturing facilities in Kentucky and New Jersey. Framebridge expects to open four additional stores in the first half of 2022. Framebridge revenues in 2021 increased from the prior year; however, revenues were down modestly in the fourth quarter of 2021 due to limited production capacity related to the challenging labor market and COVID-19 related workforce absences. In the fourth quarter of 2021, Framebridge prioritized the production of holiday guaranteed orders successfully and continue to manage a significant backlog of orders into the first quarter of 2022. Framebridge is an investment stage business and reported significant operating losses in 2021.
Code3
Code3 is a performance marketing agency focused on driving performance for brands through three core elements of digital success: media, creative and commerce. Code3 revenues were relatively flat in 2021 compared to 2020, with strong growth in creative and commerce revenues, offset by a decline in marketing spending by some advertising clients. Code3 reported overall operating losses in 2021 and 2020. In the second quarter of 2021, Code3 recorded a $1.6 million lease impairment charge (including $0.4 million in 2017 compared to $12.4property, plant and equipment write-downs). Excluding this impairment charge, Code3 reported operating income for 2021. In the second quarter of 2020, Code3 recorded a $1.5 million lease impairment charge (including $0.1 million in 2016. SocialCode’s operating resultsproperty, plant and equipment write-downs) in connection with a restructuring plan that included incentive accrualsother cost reduction initiatives. These initiatives included the approval of $1.4a SIP that reduced the number of employees at Code3, resulting in $1.0 million relatedin non-operating pension expense in the second quarter of 2020.
Megaphone
Megaphone was sold by the Company to phantom equity plansSpotify in 2017; whereas 2016 results included incentive accruals of $12.8 million related to phantom equity plans. As of December 31, 2017, the accrual balance related to these plans was $15.1 million.2020.
Other
Other businesses also include Slate and Foreign Policy, which publish online and print magazines and websites; and twofour investment stage businesses, PanoplyCyberVista, Decile and CyberVista.Pinna, as well as City Cast, a local daily podcast business that began operations in 2021. All of these businesses reported revenue increases in 2021. Losses from each of these six businesses in 20172021 adversely affected operating results.
Overall, for 2021, operating revenues for other businesses increased due largely to increases from the Leaf and Framebridge acquisitions and increases at CRG, partially offset by declines due to the sale of Megaphone in December 2020. Operating results declined in 2021 due to increased losses at Framebridge and losses at Leaf, partially offset by improvements at CRG, in addition to the goodwill and other long-lived asset impairment charges recorded in the first quarter of 2020 at CRG.
Corporate Office.Office
Corporate office includes the expenses of the Company’s corporate office and certain continuing obligations related to prior business dispositions. Corporate office expenses increased in 20172021 due primarily to higher professional services costs.

compensation costs, offset by a credit related to the fair value change in contingent consideration related to the Framebridge acquisition.

Equity in LossesEarnings of Affiliates. Affiliates
At December 31, 20172021, the Company held interestsan approximate 12% interest in a number of home health and hospice joint ventures, and interests in several other affiliates. During 2017, the Company acquired approximately 11% of Intersection Holdings, LLC (Intersection), a company that provides digital marketing and advertising services and products for cities, transit systems, airports, and other public and private spaces. The Company also holds interests in several other affiliates, including a number of home health and hospice joint ventures managed by GHG and two joint ventures managed by Kaplan. The Company recorded equity in lossesearnings of affiliates of $3.2$17.9 million and $6.7 million for 2017, compared to $7.9 million in 2016. In the fourth quarter of 2016, the Company recorded an $8.4 million write-down on its investment in HomeHero, a company that managed an online senior home care marketplace.
Net Interest Expense. The Company incurred net interest expense of $27.3 million in 2017, compared to $32.3 million in 2016. At December 31, 2017, the Company had $493.3 million in borrowings outstanding at an average interest rate of 6.3%; at December 31, 2016, the Company had $491.8 million in borrowings outstanding at an average interest rate of 6.3%.
Non-Operating Pension2021 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, Kaplan corporate and other businesses reporting.
The Company recorded net non-operating pension and postretirement benefit income of $72.7 million and $80.7 million for 2017 and 2016,2020, respectively. In the fourth quarter of 2016, the Company recorded an $18.0 million gain related to a bulk lump sum pension program offering.
Other Non-Operating Income (Expense). The Company recorded total other non-operating income, net, of $4.2 million in 2017, compared to non-operating expense, net, ofThese amounts include $12.6 million in 2016.
The 2017 non-operating income, net included $3.3 million in foreign currency gainsearnings for 2021 and other items. The 2016 non-operating expense, net, included $39.9 million in foreign currency losses; $29.4 million in cost method investment write-downs; and $1.8$2.1 million in net losses onfor 2020 from affiliates whose operations are not managed by the sales of marketable securities, partially offset by a $34.1 million gain onCompany; this includes losses from the sale of land; an $18.9 million gain on the sale of a business; a $3.2 million gain on the Residential joint venture transaction and other items.
(Benefit from) ProvisionCompany’s investment in Intersection for Income Taxes. 2021. The Company reported an income tax benefit of $119.7also recorded $6.4 million for 2017, which was significantly impacted by the enactment of the Tax Cuts and Jobs Act in December 2017. Overall, the Company recorded a $177.5 million net deferred tax benefitwrite-downs in the fourth quarter of 2017 as a result of enactment of this legislation, due largely to the revaluation of the Company’s U.S. deferred tax assets and liabilities to the lower federal tax rate and a significant reductionequity in the amount of deferred taxes previously provided on undistributed earnings of investments in non-U.S. subsidiaries. In the first quarter of 2017, the Company recorded a $5.9 million income tax benefitaffiliates related to the vestingone of restricted stock awards in connection with the adoption of 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 the effect of these items, the effective tax rate for 2017 was 34.9%.
The Company’s effective tax rate for 2016 was 32.4%. In the third quarter of 2016, a net nonrecurring $8.3 million deferred tax benefit related to Kaplan’s international operations was recorded. In the second quarter of 2016, the Company benefited from a favorable $5.6 million out of period deferred tax adjustment related to the KHE goodwill impairment recordedits investments in the third quarter of 2015. Excluding2021 and $3.6 million in write-downs in equity in earnings of affiliates related to two of its investments in the effectfirst quarter of 2020.
The recessionary environment resulting from the COVID-19 pandemic adversely impacted the underlying businesses of Intersection due to lower marketing spending by advertising clients. The decline in revenues adversely impacted the operating results and liquidity of the business since the onset of the COVID-19 pandemic.
56


The Company concluded that these items,events are not indicative of an other than temporary decline in the effective tax ratevalue of its investment to an amount less than its carrying value. Given the uncertain economic impact of the COVID-19 pandemic, it is possible that an other than temporary impairment charge could occur in 2016 was 37.9%.
FINANCIAL CONDITION: CAPITAL RESOURCES AND LIQUIDITY
Acquisitionsthe future should Intersection fail to execute on its operating strategy to address the decline in revenues and Dispositions of Businesses and Other Transactions
Acquisitions. On January 31, 2019,operating results. Further, the Company acquiredrecorded a 90% interest$30.5 million loss in two auto dealerships. equity earnings related to Intersection in 2021 and expects to record additional losses in 2022.
Net Interest Expense and Related Balances
In addition to a cash payment, aOctober 2021, the automotive subsidiary of the Company borrowed $30$24.75 million to finance the acquisition and entered into an interest rate swap to fix the interest rate on the debt at 4.7%4.118% per annum.annum; the proceeds from this borrowing were used to repay the outstanding balance of the automotive subsidiary debt that was due on January 31, 2029. The Companyautomotive subsidiary is required to repay the loan over a 10-year period by making monthly installment payments and one final payment on October 1, 2031. Additionally, in connection with the Ford automotive dealership acquisition, in December 2021, the automotive subsidiary borrowed $22.5 million, which bears interest at SOFR plus 2.05% per annum. The automotive subsidiary is required to repay the loan over a 10-year period by making monthly installment payments.
The Company also entered into a management services agreement with Christopher J. Ourisman, a memberincurred net interest expense of the Ourisman Automotive Group family of dealerships, to operate and manage the acquired dealerships.
During 2018, the Company acquired eight businesses, five in its education division, one in its healthcare division and two in other businesses for $121.1$30.5 million in cash and contingent consideration. The assets and liabilities of the companies acquired were recorded at their estimated fair values at the date of acquisition.


In January and February 2018, Kaplan acquired the assets of i-Human Patients, Inc., a provider of cloud-based, interactive patient encounter simulations for medical and nursing professionals and educators, and another small business in test preparation and international, respectively. These acquisitions are expected2021, compared to provide strategic benefits in the future.
In May 2018, Kaplan acquired a 100% interest in PPI, an independent publisher of professional licensing exam review materials and engineering, surveying, architecture, and interior design licensure exam review, by purchasing all of its issued and outstanding shares. This acquisition is expected to provide certain strategic benefits in the future. This acquisition is included in Professional (U.S.).
On July 12, 2018, Kaplan acquired 100% of the issued and outstanding shares of CFFP, a provider of financial education and training to individuals pursuing the Certified Financial Planner certification, a Master of Science in Personal Financial Planning, or a Master of Science in Finance. The acquisition is expected to expand Kaplan’s financial education product offerings and is included in Professional (U.S.).
On July 31, 2018, Dekko acquired 100% of the issued and outstanding shares of Furnlite, Inc., a Fallston, NC-based manufacturer of power and data solutions for the hospitality and residential furniture industries. Dekko’s primary reasons for the acquisition are to complement existing product offerings and to provide potential synergies across the businesses. The acquisition is included in other businesses.
In August 2018, SocialCode acquired 100% of the membership interests of Marketplace Strategy (MPS), a Cleveland-based digital marketing agency that provides strategy consulting, optimization services, advertising management and creative solutions on online marketplaces including Amazon. SocialCode’s primary reason for the acquisition is to expand its platform offerings. The acquisition is included in other businesses.
In September 2018, GHG acquired the assets of a small business and Kaplan acquired the test preparation and study guide assets of Barron’s Educational Series, a New York-based education publishing company. The acquisitions are expected to complement the healthcare and test preparation services currently offered by GHG and Kaplan, respectively. GHG is included in the healthcare division. The Barron’s Educational Series acquisition is included in test preparation.
During 2017, the Company acquired six businesses, two in its education division, two in its television broadcasting division, one in its healthcare division and one in other businesses for $318.9$34.4 million in cash and contingent consideration, and the assumption of $59.1 million in certain pension and postretirement obligations. The assets and liabilities of the companies acquired were recorded at their estimated fair values at the date of acquisition.
On January 17, 2017, the Company closed on its agreement with Nexstar Broadcasting Group, Inc. and Media General, Inc. to acquire the assets of WCWJ, a CW affiliate television station in Jacksonville, FL, and WSLS, an NBC affiliate television station in Roanoke, VA, for cash and the assumption of certain pension obligations. The acquisition of WCWJ and WSLS will complement the other stations that GMG operates. Both of these acquisitions are included in television broadcasting.
In February 2017, Kaplan acquired a 100% interest in Genesis Training Institute, a Dubai-based provider of professional development training in the United Arab Emirates, by purchasing all of its issued and outstanding shares. Additionally, Kaplan acquired a 100% interest in Red Marker Pty Ltd., an Australia-based regulatory technology company by purchasing all of its outstanding shares. These acquisitions are expected to provide certain strategic benefits in the future. Both of these acquisitions are included in Kaplan International.
In April 2017, the Company acquired 97.72% of the issued and outstanding shares of Hoover Treated Wood Products, Inc., a Thomson, GA-based supplier of pressure impregnated kiln-dried lumber and plywood products for fire retardant and preservative applications for $206.8 million, net of cash acquired. The fair value of the redeemable noncontrolling interest in Hoover was $3.7 million at the acquisition date, determined using a market approach. The minority shareholders have an option to put some of their shares to the Company starting in 2019 and the remaining shares starting in 2021. The Company has an option to buy the shares of minority shareholders starting in 2027. This acquisition is consistent with the Company’s ongoing strategy of investing in companies with a history of profitability and strong management. Hoover is included in other businesses.
At the end of June 2017, GHG acquired a 100% interest in Hometown Home Health and Hospice, a Lapeer, MI-based healthcare services provider by purchasing all of its issued and outstanding shares. This acquisition expands GHG’s service area in Michigan. GHG is included in healthcare.
During 2016, the Company acquired five businesses, three businesses included in its education division and two businesses in other businesses for $258.0 million. The assets and liabilities of the companies acquired were recorded at their estimated fair values at the date of acquisition. In January 2016, Kaplan acquired a 100% interest in Mander Portman Woodward, a provider of high-quality, bespoke education to United Kingdom (U.K.) and international students in London, Cambridge and Birmingham, by purchasing all of its issued and outstanding


shares. In February 2016, Kaplan acquired a 100% interest in Osborne Books, an educational publisher of learning resources for accounting qualifications in the U.K., by purchasing all of its issued and outstanding shares. The primary reason for these acquisitions was based on several strategic benefits expected to be realized in the future. Both of these acquisitions are included in Kaplan International.
In September 2016, Dekko acquired a 100% interest in Electri-Cable Assemblies, a Shelton, CT-based manufacturer of power, data and electrical solutions for the office furniture industry, by purchasing all of its issued and outstanding shares. Dekko’s primary reasons for the acquisition were to complement existing product offerings and provide opportunities for synergies across the businesses. This acquisition is included in other businesses.
Kaplan University Transaction. On April 27, 2017, certain subsidiaries of Kaplan entered into a Contribution and Transfer Agreement to contribute the institutional assets and operations of Kaplan University to an Indiana non-profit, public-benefit corporation that is a subsidiary affiliated with Purdue University. The closing of the transactions contemplated by the Transfer Agreement occurred on March 22, 2018. At the same time, the parties entered into the TOSA pursuant to which Kaplan provides key non-academic operations support to the new university. See information contained under the heading “Education”, which is included in Item 1 of this Annual Report on Form 10-K for more information about this transaction.
As a result of the KU Transaction, the Company recorded a pre-tax gain of $4.3 million in the first quarter of 2018. For financial reporting purposes, Kaplan may receive payment of additional consideration for the sale of the institutional assets as part of the fee to the extent there are sufficient revenues available after paying all amounts required by the TOSA.2020. The Company recorded a $1.9 million contingent consideration gain related to the disposition in the year ended December 31, 2018, and did not adjust the contingent consideration in the fourth quarter of 2018.
Sale of Businesses. In February 2018, Kaplan completed the sale of a small business which was included in Test Preparation. In September 2018, Kaplan Australia completed the sale of a small business which was included in Kaplan International. In February 2017, GHG completed the sale of Celtic Healthcare of Maryland. In the fourth quarter of 2017, Kaplan Australia completed the sale of a small business, which was included in Kaplan International. In January 2016, Kaplan completed the sale of Colloquy, which was included in Kaplan Corporate and Other. As a result of these sales, the Company reported gains (losses) in other non-operating income.
Other Transactions. In February 2019, the Company sold its interest in Gimlet Media; the Company will report a gain in the first quarter of 2019.
In June 2018, the Company incurred $6.2 million ofnet interest expense related to the mandatorily redeemable noncontrolling interest redemption settlement at GHG. The mandatorily redeemable noncontrolling interest was redeemed and paid in July 2018.
In June 2016, Residential Healthcare (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.
In June 2016, the Company purchased the outstanding 20% redeemable noncontrolling interest in Residential. At that time, the Company recorded an increase to redeemable noncontrolling interest of $3.0 million, with a corresponding decrease to capital in excess of par value, to reflect the redemption value of the redeemable noncontrolling interest at $24.0 million. Following this transaction, Celtic Healthcare (Celtic) and Residential combined their business operations to form GHG. The redeemable noncontrolling interest shareholders in Celtic exchanged their 20% interest in Celtic for a 10% mandatorily redeemable noncontrolling interest in the combined entity, and the Company recorded a $4.1 million net increasein 2021 to adjust the mandatorily redeemable noncontrolling interest to reflect the estimated fair value of the mandatorily redeemable noncontrolling interest.
Capital Expenditures. During 2018, the Company’s capital expenditures totaled $98.1 million. The Company’s capital expenditures for 2018, 2017 and 2016 are disclosed in Note 19 to the Consolidated Financial Statements. These amounts include assets acquired during the year, whereas the amounts reflected in the Company’s Statements of Cash Flows are based on cash payments made during the relevant periods.interest at GHG. The Company estimates that its capital expenditures will be in the rangerecorded interest expense of $95$8.5 million to $105 million in 2019. This includes amounts for constructing an academic and student residential facility in connection with Kaplan’s Pathways program in Liverpool, U.K. This also includes capital expenditures in connection with spectrum repacking at the Company’s television stations in Detroit, MI, Jacksonville, FL, and Roanoke, VA, as mandated by the FCC; these expenditures are expected to be largely reimbursed to the Company by the FCC.


Investments in Marketable Equity Securities. At December 31, 2018,adjust the fair value of the Company’smandatorily redeemable noncontrolling interest at GHG in the fourth quarter of 2020.
At December 31, 2021, the Company had $667.5 million in borrowings outstanding at an average interest rate of 4.3%, and cash, marketable securities and other investments of $983.3 million. At December 31, 2021, the Company had $209.6 million outstanding on its $300 million revolving credit facility. At December 31, 2020, the Company had $512.6 million in borrowings outstanding at an average interest rate of 5.1%, and cash, marketable securities and other investments of $1,010.6 million.
Non-Operating Pension and Postretirement Benefit Income, Net
The Company recorded net non-operating pension and postretirement benefit income of $109.2 million in 2021, compared to $59.3 million in 2020.
In the second quarter of 2021, the Company recorded $1.1 million in expenses related to a non-operating SIP at manufacturing. In the third quarter of 2020, the Company recorded $7.8 million in expenses related to a non-operating SIP at the education division. In the second quarter of 2020, the Company recorded $6.0 million in expenses related to a non-operating SIP at the education division and other businesses.
Gain on Marketable Equity Securities, Net
The Company recognized $243.1 million and $60.8 million in net gains on marketable equity securities in 2021 and 2020, respectively.
Other Non-Operating Income
The Company recorded total other non-operating income, net, of $32.6 million in 2021, compared to $214.5 million in 2020. The 2021 amounts included $11.8 million in fair value increases on cost method investments; $9.4 million in gains on sales of cost method investments; $3.8 million in gains related to sales of businesses and contingent consideration and other items. The 2020 amounts included $213.3 million in net gains related to sales of businesses and contingent consideration; $4.2 million in fair value increases on cost method investments; $3.7 million gain on acquiring a controlling interest in an equity affiliate; $1.4 million net gain on sales of equity affiliates and other items; partially offset by $7.3 million in impairments on cost method investments; and $2.2 million in foreign currency losses.
Provision for Income Taxes
The Company’s effective tax rate for 2021 was $496.421.4%. The Company’s effective tax rate for 2021 was favorably impacted by a $17.2 million which includes investmentsdeferred tax adjustment arising from a change in the common stockestimated deferred state income tax rate attributable to the apportionment formula used in the calculation of six publicly traded companies. At December 31, 2018, the net unrealized gaindeferred taxes related to the Company’s investments totaled $213.8 million.pension and other postretirement plans. Excluding this $17.2 million benefit, the overall income tax rate for 2021 was 25.2%.
Common Stock Repurchases and Dividend Rate. During 2018, 2017, and 2016,The Company’s effective tax rate for 2020 was 26.3%. In 2020, the Company purchasedrecorded income tax expense related to stock compensation of $2.9 million. Excluding this $2.9 million expense, the overall income tax rate for 2020 was 25.6%.
57


FINANCIAL CONDITION: LIQUIDITY AND CAPITAL RESOURCES
The Company considers the following when assessing its liquidity and capital resources:
 As of December 31
(In thousands)20212020
Cash and cash equivalents$145,886 $413,991 
Restricted cash12,957 9,063 
Investments in marketable equity securities and other investments824,445 587,582 
Total debt667,501 512,555 
Cash generated by operations is the Company’s primary source of liquidity. The Company maintains investments in a totalportfolio of 199,023, 88,361,marketable equity securities, which is considered when assessing the Company’s sources of liquidity. An additional source of liquidity includes the undrawn portion of the Company’s $300 million five-year revolving credit facility, amounting to $90.4 million at December 31, 2021.
In March 2020, the U.S. government enacted legislation, including the CARES Act to provide stimulus in the form of financial aid to businesses affected by the COVID-19 pandemic. Under the CARES Act, employers could defer the payment of the employer share of FICA taxes due for the period beginning on March 27, 2020, and 229,498 shares, respectively,ending December 31, 2020. The Company deferred $21.5 million of its Class B common stockFICA payments under this program, with $10.7 million of the deferred payments still payable at December 31, 2021. The remaining deferred balance is due by December 31, 2022.
The CARES Act also included provisions to support healthcare providers in the form of grants and changes to Medicare and Medicaid payments. In the second quarter of 2020, GHG received $7.4 million under the CARES Act as a costgeneral distribution from the Provider Relief Fund to provide relief for lost revenues and expenses incurred in connection with COVID-19. In addition to the above distribution, in April 2020, GHG applied for and received $31.5 million under the expanded Medicare Accelerated and Advanced Payment Program, modified by the CARES Act. The Department of approximately $118.0Health and Human Services (HHS) started to recoup this advance in April 2021 by withholding a portion of the amount reimbursed for claims submitted for services provided after the beginning of the recoupment period. During 2021, an amount of $18.9 million, $50.8 was withheld by HHS and the Company expects the remaining balance of $12.6 million to be withheld from claims submitted in the first half of 2022.
Governments in other jurisdictions where the Company operates also provided relief to businesses affected by the COVID-19 pandemic in the form of job retention schemes, payroll assistance, deferral of income and other tax payments, and loans. For the years ended December 31, 2021, and 2020, Kaplan has recorded benefits totaling $4.7 million and $108.9$12.2 million, respectively. On November 9, 2017, the Board of Directors authorized the Companyrespectively, related to acquire up to 500,000 shares of its Class B common stock. The Company did not announce a ceiling price or time limit for the purchases. The authorization included 163,237 shares that remained under the previous authorization. At December 31, 2018, the Company had remaining authorization from the Board of Directors to purchase up to 273,655 shares of Class B common stock.job retention and payroll schemes, mostly at Kaplan International.
The annual dividend rate for 2019 is $5.56 per share, compared to $5.32 and $5.08 in 2018 and 2017, respectively.
Liquidity. During 2018,2021, the Company’s cash and cash equivalents decreased by $136.8$268.1 million, due largely to significantthe acquisition of Leaf and several other businesses, the purchase of marketable equity securities, deferred payments on previous acquisitions, investments,capital expenditures, dividend payments and share repurchases, which was partially offset by cash generated from operations, the net proceeds from the sale of common shares. During 2018,marketable equity securities and net issuance of borrowings. In 2021, the Company’s borrowings decreasedincreased by $16.2$154.9 million, due to repayments, additional unamortized debt issuance costs,borrowings under the revolving credit facility and foreign currency fluctuations.at the automotive subsidiary, which were partially offset by repayments.
AtThe Company had no money market investments as of December 31, 2018, the Company has $253.32021, compared to $268.8 million at December 31, 2020, which are included in cash and cash equivalents, compared to $390.0 million at December 31, 2017. Restricted cash at December 31, 2018, totaled $10.9 million, compared to $17.6 million at December 31, 2017. As of December 31, 2018 and 2017, the Company had money market investments of $75.5 million and $217.6 million, respectively, that are classified as cash, cash equivalents and restricted cash in the Company’s Consolidated Financial Statements.equivalents. At December 31, 2018,2021, the Company held approximately $152$119 million in cash and cash equivalents in businesses domiciled outside the U.S., of which approximately $6$8 million is not available for immediate use in operations or for distribution. Additionally, Kaplan’s business operations outside the U.S. retain cash balances to support ongoing working capital requirements, capital expenditures, and regulatory requirements. As a result, the Company considers a significant portion of the cash and cash equivalents balance held outside the U.S. as not readily available for use in U.S. operations.
At December 31, 2018 and 2017, the Company had borrowings outstanding of $477.1 million and $493.3 million, respectively. The Company’s borrowings at December 31, 2018 were mostly from $400.0 million of 5.75% unsecured notes due June 1, 2026, and £65 million in outstanding borrowings under the Kaplan Credit Agreement; the interest on $400.0 million of 5.75% unsecured notes is payable semiannually on June 1 and December 1. The Company’s borrowings at December 31, 2017 were mostly from $400.0 million of 7.25% unsecured notes due February 1, 2019, and £70 million in outstanding borrowings under the Kaplan Credit Agreement. The Company did not have any outstanding commercial paper borrowing or revolving credit borrowing as of December 31, 2018 and 2017.
On May 30, 2018, the Company issued $400 million senior unsecured fixed-rate notes due June 1, 2026 (the Notes). The Notes are guaranteed, jointly and severally, on a senior unsecured basis, by certain of the Company’s existing and future domestic subsidiaries, as described in the terms of the indenture, dated as of May 30, 2018 (the Indenture). The Notes have a coupon rate of 5.75% per annum, payable semi-annually on June 1 and December 1. The Company may redeem the Notes in whole or in part at any time at the respective redemption prices described in the Indenture.
On June 29, 2018, the Company used the net proceeds from the sale of the Notes, together with cash on hand, to redeem the $400 million of 7.25% notes due February 1, 2019. The Company incurred $11.4 million in debt extinguishment costs in relation to the early termination of the 7.25% notes.
In combination with the issuance of the Notes, the Company and certain of the Company’s domestic subsidiaries named therein as guarantors entered into an amended and restated credit agreement providing for a U.S. $300 million five-year revolving credit facility (the Revolving Credit Facility) with each of the lenders party thereto, certain of the Company’s foreign subsidiaries from time to time party thereto as foreign borrowers, Wells Fargo Bank, N.A., as Administrative Agent (Wells Fargo), JPMorgan Chase Bank, N.A., as Syndication Agent, and HSBC Bank USA, N.A. and Bank of America, N.A. as Documentation Agents (the Amended and Restated Credit Agreement), which amends and restates the Company’s existing Five Year Credit Agreement, dated as of June 29, 2015, among the Company, certain of its domestic subsidiaries as guarantors, the several lenders from time to time party thereto, Wells Fargo Bank, N.A., as Administrative Agent and JPMorgan Chase Bank, N.A., as Syndication Agent (the Existing Credit Agreement). The Amended and Restated Credit Agreement amends the Existing Credit Agreement to (i) extend the maturity of the Revolving Credit Facility to May 30, 2023, unless the Company and the lenders agree to further extend the term, (ii) increase the aggregate principal amount of the Revolving Credit Facility to U.S. $300 million, consisting of a U.S. Dollar tranche of U.S. $200 million for borrowings in U.S. Dollars and a multicurrency tranche equivalent to U.S. $100 million for borrowings in U.S. Dollars and certain foreign currencies,


(iii) provide for borrowings under the Revolving Credit Facility in U.S. Dollars and certain other foreign currencies specified in the Amended and Restated Credit Agreement, (iv) permit certain foreign subsidiaries of the Company to be added to the Amended and Restated Credit Agreement as foreign borrowers thereunder and (v) effect certain other modifications to the Existing Credit Agreement.
Under the Amended and Restated Credit Agreement, the Company is required to pay a commitment fee on a quarterly basis, based on the Company’s leverage ratio, of between 0.15% and 0.25% of the amount of the average daily unused portion of the Revolving Credit Facility. Any borrowings under the Amended and Restated Credit Agreement are made on an unsecured basis and bear interest at the Company’s option, either at (a) a fluctuating interest rate equal to the highest of Wells Fargo’s prime rate, 0.5 percent above the Federal funds rate or the one-month Eurodollar rate plus 1%, or (b) the Eurodollar rate for the applicable currency and interest period as defined in the Amended and Restated Credit Agreement, which is generally a periodic rate equal to LIBOR, CDOR, BBSY or SOR, as applicable, in the case of each of clauses (a) and (b) plus an applicable margin that depends on the Company’s consolidated debt to consolidated adjusted EBITDA (as determined pursuant to the Amended and Restated Credit Agreement, Total Net Leverage Ratio). The Company and its foreign subsidiaries may draw on the Revolving Credit Facility for general corporate purposes. Any outstanding borrowings must be repaid on or prior to the final termination date. The Amended and Restated Credit Agreement contains terms and conditions, including remedies in the event of a default by the Company, typical of facilities of this type and requires the Company to maintain a Total Net Leverage Ratio of not greater than 3.5 to 1.0 and a consolidated interest coverage ratio of at least 3.5 to 1.0 based upon the ratio of consolidated adjusted EBITDA to consolidated interest expense as determined pursuant to the Amended and Restated Credit Agreement.
On July 14, 2016, Kaplan entered into a credit agreement (the Kaplan Credit Agreement) among Kaplan International Holdings Limited, as borrower, the lenders party thereto, HSBC BANK PLC as Facility Agent, and other agents party thereto. The Kaplan Credit Agreement provides for a four-year credit facility in an aggregate principal amount of £75 million. Borrowings bear interest at a rate per annum of LIBOR plus an applicable interest rate margin between 1.25% and 1.75%, in each case determined on a quarterly basis by reference to a pricing grid based upon the Company’s total leverage ratio. The Kaplan Credit Agreement requires that 6.66% of the amount of the loan be repaid on the first three anniversaries of funding, with the remaining balance due on July 1, 2020. The Kaplan Credit Agreement contains terms and conditions, including remedies in the event of a default by the Company, typical of facilities of this type and requires the Company to maintain a leverage ratio of not greater than 3.5 to 1.0 and a consolidated interest coverage ratio of at least 3.5 to 1.0 based upon the ratio of consolidated adjusted EBITDA to consolidated interest expense as determined pursuant to the Kaplan Credit Agreement.
On July 25, 2016, Kaplan borrowed £75 million under the Kaplan Credit Agreement. On the same date, Kaplan entered into an interest rate swap agreement with a total notional value of £75 million and a maturity date of July 1, 2020. The interest rate swap agreement will pay Kaplan variable interest on the £75 million notional amount at the three-month LIBOR, and Kaplan will pay the counterparties a fixed rate of 0.51%, effectively resulting in a total fixed interest rate of 2.01% on the outstanding borrowings at the current applicable margin of 1.50%. The interest rate swap agreement was entered into to convert the variable rate British pound borrowing under the Kaplan Credit Agreement into a fixed rate borrowing. The Company provided a guarantee on any borrowings under the Kaplan Credit Agreement. Based on the terms of the interest rate swap agreement and the underlying borrowing, the interest rate swap agreement was determined to be effective and thus qualifies as a cash flow hedge. As such, changes in2021, the fair value of the interest rate swap are recordedCompany’s investments in other comprehensive income onmarketable equity securities was $810.0 million, which includes investments in the accompanying Consolidated Balance Sheets until earnings are affected by the variabilitycommon stock of cash flows.
On May 21, 2018, Moody’s affirmed the Company’s credit ratings, but revised the outlook from Negative to Stable.
seven publicly traded companies. The Company’s current credit ratings are as follows:
Moody’sStandard & Poor’s
Long-termBa1BB+
Company purchased $48.0 million of marketable equity securities during 2021. During 2018 and 2017,2021, the Company had average borrowings outstandingsold marketable equity securities that generated proceeds of approximately $517.2 million and $493.2 million, respectively, at average annual interest rates of approximately 5.6% and 6.3%, respectively. The Company incurred net interest expense of$32.5 million and $27.3 million, respectively, during 2018 and 2017.
$65.5 million. At December 31, 2018 and 2017,2021, the net unrealized gain related to the Company’s investments totaled $536.8 million.
The Company had working capital of $720.2$680.8 million and $857.2$824.5 million at December 31, 2021 and 2020, respectively. The Company maintains working capital levels consistent with its underlying business requirements and consistently generates cash from operations in excess of required interest or principal payments.
At December 31, 2021 and 2020, the Company had borrowings outstanding of $667.5 million and $512.6 million, respectively. The Company’s borrowings at December 31, 2021 were mostly from $400.0 million of 5.75%
58


unsecured notes due June 1, 2026, $209.6 million in outstanding borrowings under the Company’s revolving credit facility and commercial notes of $47.0 million at the Automotive subsidiary. The Company’s borrowings at December 31, 2020 were mostly from $400.0 million of 5.75% unsecured notes due June 1, 2026, £55 million in outstanding borrowings under the Company’s revolving credit facility and a commercial note of $25.3 million at the Automotive subsidiary. The interest on $400.0 million of 5.75% unsecured notes is payable semiannually on June 1 and December 1.
During 2021 and 2020, the Company had average borrowings outstanding of approximately $545.2 million and $512.4 million, respectively, at average annual interest rates of approximately 4.8% and 5.1%, respectively. The Company incurred net cash provided by operating activities, as reportedinterest expense of $30.5 million and $34.4 million, respectively, during 2021 and 2020. Included in the Company’s Consolidated Statements2021 and 2020 interest expense is an amount of Cash Flows, was $287.0$4.1 million in 2018, comparedand $8.5 million, respectively, to $268.1 million in 2017.
In July 2016, Kaplan International Holdings Limited (KIHL) entered into an agreement with University of York International Pathway College LLP (York International College) to loan York International College £25 million over


adjust the next 18 months, to construct an academic building in the U.K. to be used by York International College. York International College is a limited liability partnership joint venture between Kaplan York Limited (a subsidiary of Kaplan International Colleges U.K. Limited) and a subsidiaryfair value of the University of York, that operates a pathways college; KIHL holds a 45%mandatorily redeemable noncontrolling interest in(see Note 11).
On June 3, 2021, Moody’s affirmed the joint venture. Company’s credit rating and revised the outlook from Negative to Stable. On April 27, 2021, Standard & Poor’s affirmed the Company’s credit rating and revised the outlook from Negative to Stable.
The loan will be repayable over 25 years at an interest rate of 7%, and the loan is guaranteed by the University of York. While there is no strict requirement to make annual principal and interest payments, interest will be rolled up and accrue interest at 7% if no such paymentsCompany’s current credit ratings are made. The loan becomes due and payable if the partnership agreement with KIHL is terminated. As of December 31, 2017, KIHL advanced approximately £16 million to York International College. In the second quarter of 2018, KIHL advanced a final amount of £6 million in additional funding to the joint venture under this agreement, bringing the total amount advanced to £22 million.as follows:
Moody’sStandard & Poor’s
Long-termBa1BB
OutlookStableStable
The Company expects to fund its estimated capital needs primarily through existing cash balances and internally generated funds, and, to a lesser extent,as needed, from borrowings under its revolving credit facility. As of December, 31, 2021, the Company had $209.6 million outstanding under the $300 million revolving credit facility, which borrowing was used to purchase land and buildings at Kaplan International’s sixth-form college in London, U.K. and at the automotive division in the third quarter of 2021, to repay the £60 million Kaplan UK credit facility that matured at the end of June 2020 and, to a lesser extent, to repurchase stock and fund various acquisitions during the fourth quarter of 2021. In management’s opinion, the Company will have ample liquiditysufficient financial resources to meet its business requirements in the next 12 months, including working capital requirements, capital expenditures, interest payments, potential acquisitions and strategic investments, dividends and stock repurchases.
In summary, the Company’s cash flows for each period were as follows:
 Year Ended December 31
(In thousands)202120202019
Net cash provided by operating activities$202,426 $210,663 $165,164 
Net cash (used in) provided by investing activities(494,635)199,371 (236,735)
Net cash provided by (used in) financing activities31,027 (204,002)18,734 
Effect of currency exchange rate change(3,029)2,978 2,766 
Net (decrease) increase in cash and cash equivalents and restricted cash$(264,211)$209,010 $(50,071)
Operating Activities. Cash provided by operating activities is net income adjusted for certain non-cash items and changes in assets and liabilities. The Company’s net cash flow provided by operating activities were as follows:
 Year Ended December 31
(In thousands)202120202019
Net Income$353,327 $299,968 $327,879 
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation, amortization and goodwill and other long-lived asset impairment162,225 161,207 121,648 
Amortization of lease right-of-use asset73,752 89,956 84,185 
Net pension benefit, settlement, and special separation benefit expense(91,898)(41,573)(137,909)
Other non-cash activities(183,742)(229,134)(34,714)
Change in operating assets and liabilities(111,238)(69,761)(195,925)
Net Cash Provided by Operating Activities$202,426 $210,663 $165,164 
Net cash provided by operating activities consists primarily of cash receipts from customers, less disbursements for costs, benefits, income taxes, interest and other expenses.
For 2021 compared to 2020, the decrease in net cash provided by operating activities is primarily due to changes in operating assets and liabilities, partially offset by higher net income, net of non-cash adjustments. Changes in operating assets and liabilities were driven by a decrease in the collection of accounts receivable and partial
59


repayment of advances related to the CARES Act, partially offset by other increases in accounts payable and accrued liabilities and deferred revenue.
For 2020 compared to 2019, the increase in net cash provided by operating activities is primarily due to changes in operating assets and liabilities. Changes in operating assets and liabilities were driven by the collection of accounts receivable, the advance received by GHG under the expanded Medicare Accelerated and Advanced Payment Program as modified by the CARES Act, and the deferral of FICA payments under the CARES Act.
Investing Activities. The Company’s net cash flow (used in) provided by investing activities were as follows:
 Year Ended December 31
(In thousands)202120202019
Investments in certain businesses, net of cash acquired$(351,882)$(20,080)$(179,421)
Purchases of property, plant and equipment(162,537)(69,591)(93,504)
Net proceeds from sales of marketable equity securities17,463 73,771 11,804 
Investments in equity affiliates, cost method and other investments(8,531)(12,367)(27,529)
Net proceeds from sales of businesses, property, plant and equipment and other assets10,295 225,570 54,495 
Other557 2,068 (2,580)
Net Cash (Used in) Provided by Investing Activities$(494,635)$199,371 $(236,735)
Acquisitions. During 2021, the Company acquired six businesses: two small businesses in its education division, two small businesses in healthcare, one new auto dealership in automotive, and all the outstanding shares of Leaf for cash and the assumption of $9.2 million in liabilities related to their pre-acquisition stock compensation plan, which will be paid in the future. Leaf is included in other businesses. During 2020, the Company acquired three businesses: two small businesses in its education division and an additional interest in Framebridge, Inc., which is included in other businesses. The Framebridge purchase price included $54.3 million in deferred payments and contingent consideration based on the acquiree achieving certain revenue milestones in the future. During 2019, the Company acquired eight businesses: one in education, three in healthcare, one in manufacturing, two in automotive, and one in other businesses for $211.8 million in cash and contingent consideration and the assumption of $25.8 million in floor plan payables.
Capital Expenditures. The 2021 capital expenditures are higher than 2020 and 2019 primarily due to land and building purchases at Kaplan International’s sixth-form college in London, U.K. and at the automotive division. The 2020 and 2019 capital expenditures include spending in connection with spectrum repacking at the Company’s television stations in Detroit, MI, Jacksonville, FL, and Roanoke, VA, as mandated by the FCC; these spectrum repacking expenditures were largely reimbursed to the Company by the FCC. The 2020 capital expenditures are lower than 2019 due to the completion of the construction of an academic and student residential facility in connection with Kaplan’s Pathways program in Liverpool, U.K. The amounts reflected in the Company’s Statements of Cash Flows are based on cash payments made during the relevant periods, whereas the Company’s capital expenditures for 2021, 2020 and 2019 disclosed in Note 19 to the Consolidated Financial Statements include assets acquired during the year. The Company estimates that its capital expenditures will be in the range of $80 million to $90 million in 2022.
Net Proceeds from Sales of Investments and Businesses. During 2021, 2020 and 2019, the Company sold marketable securities that generated proceeds of $65.5 million, $93.8 million and $19.3 million, respectively. The Company purchased $48.0 million, $20.0 million and $7.5 million of marketable equity securities during 2021, 2020 and 2019, respectively. In December 2020, the Company completed the sale of Megaphone; the total net proceeds from the sale were $223.0 million. In November 2019, Kaplan UK completed the sale of a small business which was included in Kaplan International. The Company sold its interest in Gimlet Media during February 2019; the total proceeds from the sale were $33.5 million.
Financing Activities. The Company’s net cash flow provided by (used in) financing activities were as follows:
 Year Ended December 31
(In thousands)202120202019
Issuance (repayments) of borrowings$20,539 $(81,276)$32,548 
Net borrowing under revolving credit facilities134,696 76,241 — 
Net (repayments of) proceeds from vehicle floor plan payable(10,563)(14,160)14,384 
Common shares repurchased(55,683)(161,829)(2,103)
Dividends paid(30,136)(29,970)(29,553)
Other(27,826)6,992 3,458 
Net Cash Provided by (Used in) Financing Activities$31,027 $(204,002)$18,734 
60


Borrowings and Vehicle Floor Plan Payable. In 2021, the Company borrowed against the $300 million revolving credit facility, which borrowing was used to purchase land and buildings at Kaplan International’s sixth-form college in London, U.K. and at the automotive division and, to a lesser extent, to repurchase stock and fund various acquisitions during the fourth quarter of 2021. In addition, the automotive subsidiary borrowed $47.3 million, which was used to repay the outstanding balance of the term loan due on January 31, 2029 and fund the acquisition of an automotive dealership in the fourth quarter. In 2020, the Company borrowed £60 million against the $300 million revolving credit facility and used the proceeds to repay the £60 million outstanding balance under the Kaplan Credit Agreement that matured at the end of June 2020. The Company repaid £5 million of these borrowings in the fourth quarter of 2020. In 2019, the Company had cash needsinflows from borrowings to fund the acquisition of two businesses at automotive and healthcare and used floor vehicle plan financing to fund the purchase of new vehicles at its automotive subsidiary.
Common Stock Repurchases. During 2021, 2020, and 2019, the Company purchased a total of 93,969, 406,112, and 3,392 shares, respectively, of its Class B common stock at a cost of approximately $55.7 million, $161.8 million, and $2.1 million, respectively. On September 10, 2020, the Board of Directors authorized the Company to acquire up to 500,000 shares of its Class B common stock. The Company did not announce a ceiling price or time limit for the purchases. At December 31, 2021, the Company had remaining authorization from the Board of Directors to purchase up to 270,182 shares of Class B common stock.
Dividends. The annual dividend rate per share was $6.04, $5.80 and $5.56 in 2019.2021, 2020 and 2019, respectively. The Company expects to pay a dividend of $6.32 per share in 2022.
Other. In 2021, the Company paid $30.9 million related to contingent consideration and deferred payments from prior acquisitions, mostly for the 2020 acquisition of Framebridge. In March 2021, Hoover’s minority shareholders put their remaining outstanding shares to the Company, which had a redemption value of $3.5 million.In 2020, the Company received $25.1 million in proceeds from the exercise of stock options. In March 2019, a Hoover minority shareholder put some shares to the Company, which had a redemption value of $0.6 million.
Contractual Obligations.The following reflects a summary of the Company’s contractual obligations as of December 31, 2018:
2021:
(in thousands)2019 2020 2021 2022 2023 Thereafter Total(in thousands)20222023202420252026ThereafterTotal
Debt and interest$30,957
 $100,028
 $23,014
 $23,015
 $23,015
 $457,531
 $657,560
Debt and interest$33,092 $241,678 $35,212 $28,626 $415,938 $36,537 $791,083 
Operating leases101,009
 84,945
 72,031
 53,709
 47,091
 115,948
 474,733
Operating leases107,541 79,854 64,030 50,392 45,897 296,514 644,228 
Programming purchase commitments (1)
9,116
 6,041
 452
 297
 157
 
 16,063
Programming purchase commitments (1)
8,821 4,952 213 177 — — 14,163 
Other purchase obligations (2)
72,245
 28,154
 13,347
 4,844
 2,034
 1,424
 122,048
Other purchase obligations (2)
97,789 44,696 24,615 12,016 6,820 25,366 211,302 
Long-term liabilities (3)
3,692
 3,497
 3,297
 3,211
 3,013
 16,986
 33,696
Long-term liabilities (3)
2,820 2,729 2,596 2,494 2,433 10,786 23,858 
Total$217,019
 $222,665
 $112,141
 $85,076
 $75,310
 $591,889
 $1,304,100
Total$250,063 $373,909 $126,666 $93,705 $471,088 $369,203 $1,684,634 
___________________
(1)
(1)    Includes commitments for the Company’s television broadcasting business that are reflected in the Company’s Consolidated Financial Statements and commitments to purchase programming to be produced in future years.
(2)Includes purchase obligations related to employment agreements, capital projects and other legally binding commitments. Other purchase orders made in the ordinary course of business are excluded from the table above. Any amounts for which the Company is liable under purchase orders are reflected in the Company’s Consolidated Balance Sheets as accounts payable and accrued liabilities.
(3)Primarily made up of multiemployer pension plan withdrawal obligations and postretirement benefit obligations other than pensions. The Company has other long-term liabilities excluded from the table above, including obligations for deferred compensation, long-term incentive plans and long-term deferred revenue.
(2)    Includes purchase obligations related to employment agreements, capital projects and other legally binding commitments. Other purchase orders made in the ordinary course of business are excluded from the table above. Any amounts for which the Company is liable under purchase orders are reflected in the Company’s Consolidated Balance Sheets as accounts payable and accrued liabilities.
(3)    Primarily made up of multiemployer pension plan withdrawal obligations and postretirement benefit obligations other than pensions. The Company has other long-term liabilities excluded from the table above, including obligations for deferred compensation, long-term incentive plans and long-term deferred revenue.
In management’s opinion, the Company will have sufficient financial resources to meet its business requirements in the next 12 months, including working capital requirements, capital expenditures, interest payments, potential acquisitions and strategic investments, dividends and stock repurchases.
Other. The Company does not have any off-balance-sheet arrangements or financing activities with special-purpose entities (SPEs).
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and judgments that affect the amounts reported in the financial statements. On an ongoing basis, the Company evaluates its estimates and assumptions. The Company bases its estimates on historical experience and other assumptions believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates.
An accounting policy is considered to be critical if it is important to the Company’s financial condition and results and if it requires management’s most difficult, subjective and complex judgments in its application. For a summary of all of the Company’s significant accounting policies, see Note 2 to the Company’s Consolidated Financial Statements.
61


Revenue Recognition, Trade Accounts Receivable and Allowance for Doubtful Accounts.Credit Losses.Education revenue is primarily derived from postsecondary education services, professional education and test preparation services. Revenue, net of any refunds, corporate discounts, scholarships and employee tuition discounts is recognized ratably over the instruction period or access period for higher education professionaland supplemental education and test preparation services.
At Kaplan International and KTP,Kaplan Supplemental Education, estimates of average student course length are developed for each course, along with estimates for the anticipated level of student drops and refunds from test performance guarantees, and these estimates are evaluated on an ongoing basis and adjusted as necessary. As Kaplan’s businesses and related course offerings have changed, including more online programs, the complexity and significance of management’s estimates have increased.
KHE provides non-academic operations support services to Purdue University Global pursuant to a Transition and Operations Support Agreement (TOSA),TOSA, which includes technology support, help-desk functions, human resources support for faculty and employees, admissions support, financial aid administration, marketing and advertising, back-office business functions, and certain student recruitment services. KHE is not entitled to receive any reimbursement of costs incurred in providing support services, or any service fee, unless and until Purdue University Global has first covered all of its operating costs (subject to a cap), received payment for cost


efficiencies, if any, and during the first five years of the TOSA receive a priority payment of $10 million per year in addition to the operating cost reimbursements and cost efficiency payments. KHE will receive reimbursement for its operating costs of providing the support services after payment of Purdue University Global’s operating costs, cost efficiency payments, and priority payment. If there are sufficient revenues, KHE may be entitled to a cost efficiency payment, if any, and an additional service fee equal to 12.5% of Purdue University Global’s revenue. Subject to certain limitations, a portion of the service fee that is earned by KHE in one year may be carried over to subsequent years for payment to Kaplan.
The support services fee and reimbursement for KHE support costs are entirely dependent on the availability of cash at the end of Purdue University Global’s fiscal year (June 30), and therefore, all consideration in the contract is variable. The Company uses significant judgment to forecast the operating results of Purdue University Global, the availability of cash at the end of each fiscal year, and the consideration it expects to receive from Purdue University Global annually. Key assumptions used in the forecast model include student census and degree enrollment data, Purdue University Global and KHE expenses, changes to working capital, contractually stipulated minimum payments, and lead conversion rates. The forecast is updated as uncertainties are resolved. The Company reviews and updates the assumptions regularly, as a significant change in one or more of these estimates could affect revenue recognized. Changes to the estimated variable consideration were not material for the year ended December 31, 2018.2021.
A Kaplan International business has a contract with an examination body through August 2032 comprised of two performance obligations, one to build and create a professional exam and another to manage the delivery of that exam to qualified candidates. The first obligation was completed in 2021. The second obligation began after the first obligation was completed and is expected to continue through the end of the contract term. Revenues are recognized for both of these obligations using forecasted financial results and the use of a market-based profit margin applied to costs incurred during the financial reporting period. This profit margin is different for each obligation as a result of the different value created by each distinct obligation. The forecast, including key assumptions such as expected candidate volumes and related exam-management expenses, is updated as future uncertainties are resolved, which may result in changes to the profit margin associated with each performance obligation. The Company reviews and updates the assumptions regularly, as a significant change in one or more of these estimates could affect revenue recognized. Changes to the estimated variable consideration were not material for the year ended December 31, 2021.
The determination of whether revenue should be reported on a gross or net basis is based on an assessment of whether the Company acts as a principal or an agent in the transaction. In certain cases, the Company is considered the agent, and the Company records revenue equal to the net amount retained when the fee is earned. In these cases, costs incurred with third-party suppliers is excluded from the Company’s revenue. The Company assesses whether it obtained control of the specified goods or services before they are transferred to the customer as part of this assessment. In addition, the Company considers other indicators such as the party primarily responsible for fulfillment, inventory risk and discretion in establishing price.
Accounts receivable have been reduced by an allowance for amounts that may be uncollectible inreflects the future.current expected credit losses associated with the receivables. This estimated allowance is based primarily on the aging category, historical collection experiencewrite-offs, current macroeconomic conditions, reasonable and supportable forecasts of future economic conditions and management’s evaluation of the financial condition of the customer. The Company generally considers an account past due or delinquent when a student or customer misses a scheduled payment. The Company writes off accounts receivable balances deemed uncollectible against the allowance for doubtful accountscredit losses following the passage of a certain period of time, or generally when the account is turned over for collection to an outside collection agency.
62


Goodwill and Other Intangible Assets. The Company has a significant amount of goodwill and indefinite-lived intangible assets that are reviewed at least annually for possible impairment.
As of December 31As of December 31
(in millions)2018 2017(in millions)20212020
Goodwill and indefinite-lived intangible assets$1,396.8
 $1,401.9
Goodwill and indefinite-lived intangible assets$1,791.8 $1,605.2 
Total assets$4,764.0
 $4,937.8
Total assets7,425.5 6,444.1 
Percentage of goodwill and indefinite-lived intangible assets to total assets29% 28%Percentage of goodwill and indefinite-lived intangible assets to total assets24 %25 %
The Company performs its annual goodwill and intangible assets impairment test as of November 30. Goodwill and other intangible assets are reviewed for possible impairment between annual tests if an event occurred or circumstances changed that would more likely than not reduce the fair value of the reporting unit or other intangible assets below its carrying value.
Goodwill
The Company tests its goodwill at the reporting unit level, which is an operating segment or one level below an operating segment. The Company initially performs an assessment of qualitative factors to determine if it is necessary to perform a quantitative goodwill impairment test. The Company quantitatively tests goodwill for impairment if, based on its assessment of the qualitative factors, it determines that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, or if it decides to bypass the qualitative assessment. The quantitative goodwill impairment test compares the estimated fair value of a reporting unit with its carrying amount, including goodwill. An impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value.

In the third quarter of 2021, as a result of the emergence of the COVID-19 Delta variant and continued weak product demand in the commercial office electrical products and hospitality sectors caused by the COVID-19 pandemic, the Company performed an interim review of the goodwill and indefinite-lived intangibles of the Dekko reporting unit. As a result of the impairment review, the Company recorded a $26.7 million goodwill impairment charge. The Company estimated the fair value of the reporting unit by utilizing a discounted cash flow model. The carrying value of the reporting unit exceeded the estimated fair value, resulting in a goodwill impairment charge for the amount by which the carrying value exceeded the estimated fair value after taking into account the effect of deferred income taxes. Dekko is included in manufacturing.

The Company had 1520 reporting units as of December 31, 2018.2021. The reporting units with significant goodwill balances as of December 31, 2018,2021, were as follows, representing 89% of the total goodwill of the Company:
(in millions)Goodwill
Education 
Kaplan international$583.4
Higher education63.2
Test preparation64.7
Professional (U.S.)86.2
Television broadcasting190.8
Healthcare69.6
Hoover91.3
Total$1,149.2
(in millions)Goodwill
Education
Kaplan international$621.3 
Higher education63.2 
Supplemental education170.6 
Television broadcasting190.8 
Leaf162.0 
Healthcare118.3 
Hoover91.3 
Dekko47.8 
Total$1,465.3 
As of November 30, 2018,2021, in connection with the Company’s annual impairment testing, the Company decided to perform the quantitative goodwill impairment process at all of the reporting units.units with the exception of Framebridge, for which it performed a qualitative assessment. The Company’s policy requires the performance of a quantitative impairment review of the goodwill at least once every three years. The Company used a discounted cash flow model, and, where appropriate, a market value approach was also utilized to supplement the discounted cash flow model to determine the estimated fair value of its reporting units. The Company made estimates and assumptions regarding future cash flows, discount rates, long-term growth rates and market values to determine each reporting unit’s estimated fair value. The methodology used to estimate the fair value of the Company’s reporting units on November 30, 2018,2021, was consistent with the one used during the 20172020 annual goodwill impairment test.
63


The Company made changes to certain of its assumptions utilized in the discounted cash flow models for 20182021 compared with the prior year to take into account changes in the economic environment, regulations and their impact on the Company’s businesses. The key assumptions used by the Company were as follows:
•    Expected cash flows underlying the Company’s business plans for the periods 20192022 through 20232026 were used. The Company used expected cash flows for the periods 2022 through 2031 for the Hoover reporting unit. The expected cash flows took into account historical growth rates, the effect of the changed economic outlook at the Company’s businesses, industry challenges and an estimate for the possible impact of any applicable regulations.
•    Cash flows beyond 20232026 were projected to grow at a long-term growth rate, which the Company estimated between 1.5% and 3% for each reporting unit.
•    The Company used a discount rate of 9.5%10% to 21.5%17% to risk adjust the cash flow projections in determining the estimated fair value.
The fair value of each of the reporting units exceeded its respective carrying value as of November 30, 2018.2021.
The estimated fair value of threethe Dekko reporting unitsunit at the manufacturing businesses exceeded their respectiveits carrying valuesvalue by a margin less than 25% following a decreasegoodwill impairment recorded in their estimated fair values compared with the prior year.third quarter of 2021. The total goodwill at these threethis reporting unitsunit was $223.9$47.8 million as of December 31, 2018,2021, or 17%3% of the total goodwill of the Company. There exists a reasonable possibility that a decrease in the assumed projected cash flows or long-term growth rate, or an increase in the discount rate assumption used in the discounted cash flow model of thesethis reporting units,unit, could result in an additional impairment charge.
The estimated fair value of the Company’s other reporting units with significant goodwill balances exceeded their respective carrying values by a margin in excess of 25%. It is possible that impairment charges could occur in the future, given changes in market conditions and the inherent variability in projecting future operating performance. Additional COVID-19 disruptions could result in future adverse changes in projections for future operating results or other key assumptions, such as projected revenue, profit margin, capital expenditures or cash flows associated with fair value estimates and could lead to additional future impairments, which could be material.
Indefinite-Lived Intangible Assets
The Company initially assesses qualitative factors to determine if it is more likely than not that the fair value of its indefinite-lived intangible assets is less than its carrying value. The Company compares the fair value of the indefinite-lived intangible asset with its carrying value if the qualitative factors indicate it is more likely than not that the fair value of the asset is less than its carrying value or if it decides to bypass the qualitative assessment. The Company records an impairment loss if the carrying value of the indefinite-lived intangible assets exceeds the fair value of the assets for the difference in the values. The Company uses a discounted cash flow model, and, in certain cases, a market value approach is also utilized to supplement the discounted cash flow model to determine the estimated fair value of the indefinite-lived intangible assets. The Company makes estimates and assumptions regarding future cash flows, discount rates, long-term growth rates and other market values to determine the estimated fair value of the indefinite-lived intangible assets. The Company’s policy requires the performance of a quantitative impairment review of the indefinite-lived intangible assets at least once every three years.


The Company’s intangible assets with an indefinite life are principally from trade names, franchise rights and FCC licenses. The fair value of eachthe indefinite-lived intangible assetassets exceeded itstheir respective carrying valuevalues as of November 30, 2018.2021. There is always a possibility that impairment charges could occur in the future, given the inherent variability in projecting future operating performance. Additional COVID-19 disruptions could result in future adverse changes in projections for future operating results or other key assumptions, such as projected revenue, profit margin, capital expenditures or cash flows associated with fair value estimates and could lead to additional future impairments, which could be material.
Pension Costs. The Company sponsors a defined benefit pension plan for eligible employees in the U.S. Excluding curtailment gains, settlement gains and special termination benefits, the Company’s net pension credit was $74.0$93.0 million, $59.0$55.4 million and $49.1$52.7 million for 2018, 20172021, 2020 and 2016,2019, respectively. The Company’s pension benefit obligation and related credits are actuarially determined and are impacted significantly by the Company’s assumptions related to future events, including the discount rate, expected return on plan assets and rate of compensation increases. The Company evaluates these critical assumptions at least annually and, periodically, evaluates other assumptions involving demographic factors, such as retirement age, mortality and turnover, and updates them to reflect its experience and expectations for the future. Actual results in any given year will often differ from actuarial assumptions because of economic and other factors.
The Company assumed a 6.25% expected return on plan assets for 20182021, 2020 and 2017, which was a change from the 6.5% expected return assumption for 2016.2019. The Company’s actual (loss) return on plan assets was (2.5)%24.4% in 2018, 19.2%2021, 25.4% in 20172020 and (2.0)%23.9% in 2016.2019. The 10-year and 20-year actual returns on plan assets on an annual basis were 11.6%13.7% and 7.2%10.0%, respectively.
64


Accumulated and projected benefit obligations are measured as the present value of future cash payments. The Company discounts those cash payments using the weighted average of market-observed yields for high-quality fixed-income securities with maturities that correspond to the payment of benefits. Lower discount rates increase present values and generally increase subsequent-year pension costs; higher discount rates decrease present values and decrease subsequent-year pension costs. The Company’s discount rate at December 31, 2018, 20172021, 2020 and 2016,2019, was 4.3%2.9%, 3.6%2.5% and 4.1%3.3%, respectively, reflecting market interest rates.
Changes in key assumptions for the Company’s pension plan would have had the following effects on the 20182021 pension credit, excluding curtailment gains, settlement gains and special termination benefits:
•    Expected return on assets – A 1% increase or decrease to the Company’s assumed expected return on plan assets would have increased or decreased the pension credit by approximately $20.8$22.1 million.
•    Discount rate – A 1% decrease to the Company’s assumed discount rate would have decreased the pension credit by approximately $2.4$0.6 million. A 1% increase to the Company’s assumed discount rate would have decreasedincreased the pension credit by approximately $24.6$18.0 million.
The Company’s net pension credit includes an expected return on plan assets component, calculated using the expected return on plan assets assumption applied to a market-related value of plan assets. The market-related value of plan assets is determined using a five-year average market value method, which recognizes realized and unrealized appreciation and depreciation in market values over a five-year period. The value resulting from applying this method is adjusted, if necessary, such that it cannot be less than 80% or more than 120% of the market value of plan assets as of the relevant measurement date. As a result, year-to-year increases or decreases in the market-related value of plan assets impact the return on plan assets component of pension credit for the year.
At the end of each year, differences between the actual return on plan assets and the expected return on plan assets are combined with other differences in actual versus expected experience to form a net unamortized actuarial gain or loss in accumulated other comprehensive income. Only those net actuarial gains or losses in excess of the deferred realized and unrealized appreciation and depreciation are potentially subject to amortization.
The types of items that generate actuarial gains and losses that may be subject to amortization in net periodic pension (credit) cost include the following:
•    Asset returns that are more or less than the expected return on plan assets for the year;
•    Actual participant demographic experience different from assumed (retirements, terminations and deaths during the year);
•    Actual salary increases different from assumed; and
•    Any changes in assumptions that are made to better reflect anticipated experience of the plan or to reflect current market conditions on the measurement date (discount rate, longevity increases, changes in expected participant behavior and expected return on plan assets).
Amortization of the unrecognized actuarial gain or loss is included as a component of pension credit for a year if the magnitude of the net unamortized gain or loss in accumulated other comprehensive income exceeds 10% of the


greater of the benefit obligation or the market-related value of assets (10% corridor). The amortization component is equal to that excess divided by the average remaining service period of active employees expected to receive benefits under the plan. At the end of 2015,2018, the Company had no net unamortized actuarial gains or losses in accumulated other comprehensive income subject to amortization outside the 10% corridor, and therefore, no amortized gain or loss amounts werewas included in the pension credit for 2016.2019.
During 2016,2019, there waswere significant pension asset gains offset by a decrease in the discount rate and pension asset lossesthe purchase of a group annuity contract that resulted in no net unamortized actuarial gains in accumulated other comprehensive income subject to amortization outside the 10% corridor, and therefore, anno amortized gain of $4.4 millionamount was included in the pension credit for 2017.2020.
During 2017,2020, there were significant pension asset gains offset by a further decrease in the discount rate that resulted in unamortized gains in accumulated other comprehensive income subject to amortization outside the corridor, and therefore, an amortized gain of $1.0 million was included in the pension credit for the first three months of 2018.
As a result of the Kaplan University transaction, the Company remeasured the accumulated and projected benefit obligations as of March 22, 2018, and recorded a curtailment gain. During the first three months there was an increase in the discount rate offset by pension assets losses that resulted in net unamortized actuarial gains in accumulated other comprehensive income subject to amortization outside the 10% corridor, and therefore, an amortized gain of $9.0$7.9 million was included in the pension credit for the last nine months of 2018. 2021.
During the last nine months of 2018,2021, there were significant pension asset losses offset by a furthergains and an increase in the discount rate; however, therate. The Company currently estimates that there will be net unamortized actuarial gains in accumulated other comprehensive income subject to amortization outside the 10% corridor, and therefore, an amortized gain amount of $0.2$68.9 million is included in the estimated pension credit for 2019.2022.
65


Overall, the Company estimates that it will record a net pension credit of approximately $54$179 million in 2019.2022.
Note 1415 to the Company’s Consolidated Financial Statements provides additional details surrounding pension costs and related assumptions.
Accounting for Income Taxes. 
Valuation Allowances
Deferred income taxes arise from temporary differences between the tax and financial statement recognition of assets and liabilities. In evaluating its ability to recover deferred tax assets within the jurisdiction from which they arise, the Company considers all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial operations. These assumptions require significant judgment about forecasts of future taxable income.
As of December 31, 2018,2021, the Company had state income tax net operating loss carryforwards of $698.9$1,026.1 million, which will expire at various future dates. Also at December 31, 2018,2021, the Company had $58.1$87.1 million of non-U.S. income tax loss carryforwards, of which $46.8$44.2 million may be carried forward indefinitely; $8.4$12.2 million of losses that, if unutilized, will expire in varying amounts through 2023;2026; and $2.9$30.7 million of losses that, if unutilized, will start to expire after 2023.2026. At December 31, 2018,2021, the Company has established approximately $33.1$57.6 million in total valuation allowances, primarily against deferred state tax assets, net of U.S. Federal income taxes, and non-U.S. deferred tax assets, as the Company believes that it is more likely than not that the benefit from certain state and non-U.S. net operating loss carryforwards and other deferred tax assets will not be realized. The Company has established valuation allowances against state income tax benefits recognized, without considering potentially offsetting deferred tax liabilities established with respect to prepaid pension cost and goodwill. Prepaid pension cost and goodwill have not been considered a source of future taxable income for realizing deferred tax benefits recognized since these temporary differences are not likely to reverse in the foreseeable future. However, certain deferred state tax assets have an indefinite life. As a result, the Company has considered deferred tax liabilities for prepaid pension cost and goodwill as a source of future taxable income for realizing those deferred state tax assets. The valuation allowances established against state and non-U.S. income tax benefits recorded may increase or decrease within the next 12 months, based on operating results, the market value of investment holdings or business and tax planning strategies; as a result, the Company is unable to estimate the potential tax impact, given the uncertain operating and market environment. The Company will be monitoring future operating results and projected future operating results on a quarterly basis to determine whether the valuation allowances provided against state and non-U.S. deferred tax assets should be increased or decreased, as future circumstances warrant. The Company’s education division released valuation allowances against state deferred tax assets of $20.0 million during 2018, as the education division recently generated positive operating results that support the realization of these deferred tax assets.
Uncertain Tax Positions
The Company recognizes a tax benefit from an uncertain tax position when it is more likely than not that the position will be sustained upon examination, including resolutions of any related to appeals or litigation processes based on the technical merits. The Company records a liability for the difference between the benefit recognized and measured for financial statement purposes and the tax position taken or expected to be taken on the


Company’s tax return. Changes in the estimate are recorded in the period in which such termination is made. The Company expects that a $2.5 million state tax benefit, net of $0.5 million federal tax expense, will reduce the effective tax rate in the future if recognized.
The Company classifies interest and penalties related to uncertain tax positions as a component of interest and other expenses, respectively. As of December 31, 2018, the Company has accrued $0.6 million of interest related to the unrecognized tax benefits. The Company has not accrued any penalties related to the unrecognized tax benefits.
Tax Cuts and Jobs Act
The Tax Cuts and Jobs Act (the Tax Act) was enacted on December 22, 2017, making significant changes to the Internal Revenue Code. In accordance with SEC Staff Accounting Bulletin No. 118 (SAB 118), the Company finalized its analysis of the Tax Act and no material adjustments were made to previously recorded provision amounts in the Consolidated Financial Statements for the year ended December 31, 2018.
Recent Accounting Pronouncements. See Note 2 to the Company’s Consolidated Financial Statements for a discussion of recent accounting pronouncements.


66


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To theBoard of Directors and
Stockholders of Graham Holdings Company
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Graham Holdings Company and its subsidiaries (the “Company”) as of December 31, 20182021 and 2017,2020, and the related consolidated statements of operations, of comprehensive income, (loss),of changes in common stockholders’stockholders' equity and of cash flows for each of the three years in the period ended December 31, 2018,2021, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2018,2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 20182021 and 2017,2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 20182021 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018,2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Change in Accounting Principles
As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for revenue from contracts with customers and the manner in which it accounts for pension and postretirement benefit costs in 2018.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable


assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
67


Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Goodwill Impairment Assessments – Hoover and Dekko Reporting Units
As described in Notes 2 and 9 to the consolidated financial statements, the Company’s consolidated goodwill balance was $1,649.6 million as of December 31, 2021. As disclosed by management, the goodwill associated with the Hoover and Dekko reporting units was $91.3 million and $47.8 million, respectively as of December 31, 2021. Management reviews goodwill for possible impairment at least annually, as of November 30, or between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying value. An impairment charge is recognized for the amount by which the carrying value exceeds the reporting unit’s fair value. Management reviews the carrying value of goodwill utilizing a discounted cash flow model. To determine the estimated fair value of the reporting unit, management makes assumptions regarding estimated future cash flows, discount rates, long-term growth rates, and market values.
The principal considerations for our determination that performing procedures relating to the goodwill impairment assessments of the Hoover and Dekko reporting units is a critical audit matter are (i) the significant judgment by management when determining the fair value of the reporting units; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s estimated future cash flows and significant assumptions related to revenues, profit margins, and the discount rate; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessment, including controls over the valuation of the Company’s reporting units. These procedures also included, among others, (i) testing management’s process for determining the fair value of the Hoover and Dekko reporting units; (ii) evaluating the appropriateness of the discounted cash flow model; (iii) testing the completeness and accuracy of underlying data used in the model; and (iv) evaluating the reasonableness of significant assumptions related to revenues, profit margins, and the discount rate. Evaluating management’s assumptions related to revenues and profit margins involved evaluating whether the assumptions used were reasonable considering (i) the current and past performance of the reporting unit; (ii) relevant industry forecasts and macroeconomic conditions; (iii) consistency with external market and industry data; (iv) management’s historical forecasting accuracy; (v) consistency with evidence obtained in other areas of the audit; and (vi) the Company’s objectives and strategies. Professionals with specialized skill and knowledge were used to assist in evaluating the appropriateness of the model and the reasonableness of the discount rate assumption.
/s/ PricewaterhouseCoopers LLP
McLean, VirginiaWashington, District of Columbia
February 25, 20192022

We have served as the Company’s auditor since 1946.

68





GRAHAM HOLDINGS COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended December 31 Year Ended December 31
(in thousands, except per share amounts)2018 2017 2016(in thousands, except per share amounts)202120202019
Operating Revenues$2,695,966
 $2,591,846
 $2,481,890
Operating Revenues
Sales of servicesSales of services$2,089,800 $2,056,228 $2,111,035 
Sales of goodsSales of goods1,096,174 832,893 821,064 
3,185,974 2,889,121 2,932,099 
Operating Costs and Expenses     Operating Costs and Expenses
Operating1,687,432
 1,454,343
 1,270,030
Cost of services sold (exclusive of items shown below)Cost of services sold (exclusive of items shown below)1,243,384 1,239,241 1,315,928 
Cost of goods sold (exclusive of items shown below)Cost of goods sold (exclusive of items shown below)871,137 672,865 632,318 
Selling, general and administrative650,128
 887,790
 896,097
Selling, general and administrative831,853 715,401 717,659 
Depreciation of property, plant and equipment56,722
 62,509
 64,620
Depreciation of property, plant and equipment71,415 74,257 59,253 
Amortization of intangible assets47,414
 41,187
 26,671
Amortization of intangible assets57,870 56,780 53,243 
Impairment of goodwill and other long-lived assets8,109
 9,614
 1,603
Impairment of goodwill and other long-lived assets32,940 30,170 9,152 
2,449,805
 2,455,443
 2,259,021
3,108,599 2,788,714 2,787,553 
Income from Operations246,161
 136,403
 222,869
Income from Operations77,375 100,407 144,546 
Equity in earnings (losses) of affiliates, net14,473
 (3,249) (7,937)
Equity in earnings of affiliates, netEquity in earnings of affiliates, net17,914 6,664 11,664 
Interest income5,353
 6,581
 3,093
Interest income3,409 3,871 6,151 
Interest expense(37,902) (33,886) (35,390)Interest expense(33,943)(38,310)(29,779)
Debt extinguishment costs(11,378) 
 
Non-operating pension and postretirement benefit income, net120,541
 72,699
 80,665
Non-operating pension and postretirement benefit income, net109,230 59,315 162,798 
Loss on marketable equity securities, net(15,843) 
 
Other income (expense), net2,103
 4,241
 (12,642)
Gain on marketable equity securities, netGain on marketable equity securities, net243,088 60,787 98,668 
Other income, netOther income, net32,554 214,534 32,431 
Income Before Income Taxes323,508
 182,789
 250,658
Income Before Income Taxes449,627 407,268 426,479 
Provision for (Benefit from) Income Taxes52,100
 (119,700) 81,200
Provision for Income TaxesProvision for Income Taxes96,300 107,300 98,600 
Net Income271,408
 302,489
 169,458
Net Income353,327 299,968 327,879 
Net Income Attributable to Noncontrolling Interests(202) (445) (868)
Net (Income) Loss Attributable to Noncontrolling InterestsNet (Income) Loss Attributable to Noncontrolling Interests(1,252)397 (24)
Net Income Attributable to Graham Holdings Company Common Stockholders$271,206
 $302,044
 $168,590
Net Income Attributable to Graham Holdings Company Common Stockholders$352,075 $300,365 $327,855 
Per Share Information Attributable to Graham Holdings Company Common Stockholders     Per Share Information Attributable to Graham Holdings Company Common Stockholders 


Basic net income per common share$50.55
 $54.24
 $29.95
Basic net income per common share$70.65 $58.30 $61.70 
Basic average number of common shares outstanding5,333
 5,516
 5,559
Basic average number of common shares outstanding4,951 5,124 5,285 
Diluted net income per common share$50.20
 $53.89
 $29.80
Diluted net income per common share$70.45 $58.13 $61.21 
Diluted average number of common shares outstanding5,370
 5,552
 5,589
Diluted average number of common shares outstanding4,965 5,139 5,327 
See accompanying Notes to Consolidated Financial Statements.

69



GRAHAM HOLDINGS COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
 Year Ended December 31
(in thousands)2018 2017 2016
Net Income$271,408
 $302,489
 $169,458
Other Comprehensive (Loss) Income, Before Tax     
Foreign currency translation adjustments:     
Translation adjustments arising during the year(35,584) 33,175
 (22,149)
Adjustment for sales of businesses with foreign operations
 137
 
 (35,584) 33,312
 (22,149)
Unrealized gains on available-for-sale securities:     
Unrealized gains for the year
 112,086
 55,507
Reclassification adjustment for realization of loss on sale of available-for-sale securities included in net income
 
 1,879
 
 112,086
 57,386
Pension and other postretirement plans:     
Actuarial (loss) gain(101,013) 179,674
 (133,915)
Prior service credit (cost)4,262
 (75) 
Amortization of net actuarial (gain) loss included in net income(11,349) (6,527) 1,157
Amortization of net prior service (credit) cost included in net income(947) 477
 419
Curtailments and settlements included in net income(30,267) 
 (17,993)
 (139,314) 173,549
 (150,332)
Cash flow hedge gain (loss)551
 112
 (334)
Other Comprehensive (Loss) Income, Before Tax(174,347) 319,059
 (115,429)
Income tax benefit (expense) related to items of other comprehensive (loss) income37,510
 (90,923) 37,235
Other Comprehensive (Loss) Income, Net of Tax(136,837) 228,136
 (78,194)
Comprehensive Income134,571
 530,625
 91,264
Comprehensive income attributable to noncontrolling interests(202) (445) (868)
Total Comprehensive Income Attributable to Graham Holdings Company$134,369
 $530,180
 $90,396
 Year Ended December 31
(in thousands)202120202019
Net Income$353,327 $299,968 $327,879 
Other Comprehensive Income, Before Tax
Foreign currency translation adjustments:
Translation adjustments arising during the year(16,052)31,642 5,371 
Adjustment for sale of a business with foreign operations — 2,011 
 (16,052)31,642 7,382 
Pension and other postretirement plans:   
Actuarial gain519,595 365,164 231,104 
Prior service cost(2)(69)(5,725)
Amortization of net actuarial (gain) loss included in net income(5,486)1,219 (2,046)
Amortization of net prior service cost (credit) included in net income3,170 2,680 (4,142)
Settlements included in net income(120)— (91,676)
 517,157 368,994 127,515 
Cash flow hedges gain (loss)349 (1,282)(1,344)
Other Comprehensive Income, Before Tax501,454 399,354 133,553 
Income tax expense related to items of other comprehensive income(133,380)(99,335)(34,087)
Other Comprehensive Income, Net of Tax368,074 300,019 99,466 
Comprehensive Income721,401 599,987 427,345 
Comprehensive (income) loss attributable to noncontrolling interests(1,252)397 (24)
Total Comprehensive Income Attributable to Graham Holdings Company$720,149 $600,384 $427,321 
See accompanying Notes to Consolidated Financial Statements.

70



GRAHAM HOLDINGS COMPANY
CONSOLIDATED BALANCE SHEETS
As of December 31 As of December 31
(In thousands, except share amounts)2018 2017(In thousands, except share amounts)20212020
Assets   Assets  
Current Assets   Current Assets  
Cash and cash equivalents$253,256
 $390,014
Cash and cash equivalents$145,886 $413,991 
Restricted cash10,859
 17,552
Restricted cash12,175 9,063 
Investments in marketable equity securities and other investments514,581
 557,153
Investments in marketable equity securities and other investments824,445 587,582 
Accounts receivable, net582,280
 620,319
Accounts receivable, net607,471 537,156 
Inventories and contracts in progressInventories and contracts in progress141,471 120,622 
Prepaid expensesPrepaid expenses81,741 75,523 
Income taxes receivable19,166
 23,901
Income taxes receivable32,744 29,313 
Inventories and contracts in progress69,477
 60,612
Other current assets82,723
 66,253
Other current assets1,241 942 
Total Current Assets1,532,342
 1,735,804
Total Current Assets1,847,174 1,774,192 
Property, Plant and Equipment, Net293,085
 259,358
Property, Plant and Equipment, Net468,126 378,286 
Lease Right-of-Use AssetsLease Right-of-Use Assets437,969 462,560 
Investments in Affiliates143,813
 128,590
Investments in Affiliates155,444 155,777 
Goodwill, Net1,297,712
 1,299,710
Goodwill, Net1,649,582 1,484,750 
Indefinite-Lived Intangible Assets99,052
 102,195
Indefinite-Lived Intangible Assets142,180 120,437 
Amortized Intangible Assets, Net263,261
 237,976
Amortized Intangible Assets, Net247,120 204,646 
Prepaid Pension Cost1,003,558
 1,056,777
Prepaid Pension Cost2,306,514 1,708,305 
Deferred Income Taxes13,388
 15,367
Deferred Income Taxes7,900 8,396 
Deferred Charges and Other Assets117,830
 102,046
Deferred Charges and Other Assets (includes $782 and $0 of restricted cash)Deferred Charges and Other Assets (includes $782 and $0 of restricted cash)163,516 146,770 
Total Assets$4,764,041
 $4,937,823
Total Assets$7,425,525 $6,444,119 
Liabilities and Equity 
  
Liabilities and Equity  
Current Liabilities 
  
Current Liabilities  
Accounts payable and accrued liabilities$486,578
 $526,323
Accounts payable and accrued liabilities$583,629 $520,236 
Deferred revenue308,728
 339,454
Deferred revenue358,720 331,021 
Income taxes payable10,496
 6,109
Income taxes payable4,585 5,140 
Current portion of lease liabilitiesCurrent portion of lease liabilities77,655 86,797 
Current portion of long-term debt6,360
 6,726
Current portion of long-term debt141,749 6,452 
Total Current Liabilities812,162
 878,612
Total Current Liabilities1,166,338 949,646 
Accrued Compensation and Related Benefits179,652
 213,889
Accrued Compensation and Related Benefits175,391 201,918 
Other Liabilities57,901
 65,977
Other Liabilities36,497 48,768 
Deferred Income Taxes322,421
 362,701
Deferred Income Taxes676,706 521,274 
Mandatorily Redeemable Noncontrolling Interest
 10,331
Mandatorily Redeemable Noncontrolling Interest13,661 9,240 
Lease LiabilitiesLease Liabilities405,200 428,849 
Long-Term Debt470,777
 486,561
Long-Term Debt525,752 506,103 
Total Liabilities1,842,913
 2,018,071
Total Liabilities2,999,545 2,665,798 
Commitments and Contingencies (Notes 17 and 18)


 

Commitments and Contingencies (Note 18)
Commitments and Contingencies (Note 18)
00
Redeemable Noncontrolling Interests4,346
 4,607
Redeemable Noncontrolling Interests14,311 11,928 
Preferred Stock, $1 par value; 977,000 shares authorized, none issued

 
Preferred Stock, $1 par value; 977,000 shares authorized, none issued
 — 
Common Stockholders’ Equity 
  
Common Stockholders’ Equity  
Common stock 
  
Common stock  
Class A Common stock, $1 par value; 7,000,000 shares authorized; 964,001 shares issued and outstanding
964
 964
Class A Common stock, $1 par value; 7,000,000 shares authorized; 964,001 shares issued and outstanding
964 964 
Class B Common stock, $1 par value; 40,000,000 shares authorized; 19,035,999 shares issued; 4,336,958 and 4,540,493 shares outstanding19,036
 19,036
Class B Common stock, $1 par value; 40,000,000 shares authorized; 19,035,999 shares issued; 3,942,065 and 4,018,832 shares outstandingClass B Common stock, $1 par value; 40,000,000 shares authorized; 19,035,999 shares issued; 3,942,065 and 4,018,832 shares outstanding19,036 19,036 
Capital in excess of par value378,837
 370,700
Capital in excess of par value389,456 388,159 
Retained earnings6,236,125
 5,791,724
Retained earnings7,126,761 6,804,822 
Accumulated other comprehensive income, net of taxes 
  
Accumulated other comprehensive income, net of taxes  
Cumulative foreign currency translation adjustment(29,270) 6,314
Cumulative foreign currency translation adjustment(6,298)9,754 
Unrealized gain on available-for-sale securities
 194,889
Unrealized gain on pensions and other postretirement plans232,836
 334,536
Unrealized gain on pensions and other postretirement plans979,157 595,287 
Cash flow hedge263
 (184)
Cost of 14,699,041 and 14,495,506 shares of Class B common stock held in treasury(3,922,009) (3,802,834)
Cash flow hedgesCash flow hedges(1,471)(1,727)
Cost of 15,093,934 and 15,017,167 shares of Class B common stock held in treasury
Cost of 15,093,934 and 15,017,167 shares of Class B common stock held in treasury
(4,108,022)(4,056,993)
Total Common Stockholders’ EquityTotal Common Stockholders’ Equity4,399,583 3,759,302 
Noncontrolling InterestsNoncontrolling Interests12,086 7,091 
Total Equity2,916,782
 2,915,145
Total Equity4,411,669 3,766,393 
Total Liabilities and Equity$4,764,041
 $4,937,823
Total Liabilities and Equity$7,425,525 $6,444,119 
See accompanying Notes to Consolidated Financial Statements.

71



GRAHAM HOLDINGS COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31 Year Ended December 31
(In thousands)2018 2017 2016(In thousands)202120202019
Cash Flows from Operating Activities     Cash Flows from Operating Activities   
Net Income$271,408
 $302,489
 $169,458
Net Income$353,327 $299,968 $327,879 
Adjustments to reconcile net income to net cash provided by operating activities:     Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation, amortization and goodwill and other long-lived asset impairment112,245
 113,310
 92,894
Depreciation, amortization and goodwill and other long-lived asset impairment162,225 161,207 121,648 
Net pension benefit(100,948) (59,039) (67,097)
Early retirement and special separation benefit program expense
 1,825
 
Loss on marketable equity securities and cost method investments, net4,180
 
 
Amortization of lease right-of-use assetAmortization of lease right-of-use asset73,752 89,956 84,185 
Net pension benefit, settlement, and special separation benefit expenseNet pension benefit, settlement, and special separation benefit expense(91,898)(41,573)(137,909)
Gain on marketable equity securities and cost method investments, netGain on marketable equity securities and cost method investments, net(254,844)(57,669)(103,748)
Credit loss expense and provision for other receivablesCredit loss expense and provision for other receivables6,824 10,667 22,726 
Stock-based compensation expense, net6,412
 10,169
 13,418
Stock-based compensation expense, net5,659 6,348 6,278 
Debt extinguishment costs10,563
 
 
Foreign exchange loss (gain)3,844
 (3,310) 39,890
Net (gain) loss on sales and disposition of businesses(8,157) 569
 (22,163)
Net (gain) loss on dispositions, sales or write-downs of marketable equity securities and cost method investments(148) 200
 30,449
Equity in (earnings) losses of affiliates, net of distributions(10,606) 3,646
 8,859
(Benefit from) provision for deferred income taxes(7,123) (146,452) 10,070
Net (gain) loss on sales or write-downs of property, plant and equipment(1,642) 413
 (32,362)
Contingent consideration fair value measurements and accretionContingent consideration fair value measurements and accretion(4,207)2,895 — 
Foreign exchange lossForeign exchange loss179 2,153 1,070 
Gain on disposition and write-downs of businesses, property, plant and equipment, investments and other assets, netGain on disposition and write-downs of businesses, property, plant and equipment, investments and other assets, net(8,554)(214,926)(28,346)
Equity in earnings of affiliates, net of distributionsEquity in earnings of affiliates, net of distributions4,917 6,592 (2,678)
Provision for deferred income taxesProvision for deferred income taxes65,046 14,377 69,751 
Change in operating assets and liabilities:     
Change in operating assets and liabilities: 
Accounts receivable, net59,847
 11,086
 (47,892)
Accounts receivableAccounts receivable(59,292)61,328 (53,602)
Inventories(7,351) (541) (2,422)Inventories4,551 3,786 (5,317)
Accounts payable and accrued liabilities(44,892) 19,380
 58,147
Accounts payable and accrued liabilities32,397 (32,714)(47,069)
Deferred revenue14,801
 13,903
 16,552
Deferred revenue19,086 (25,728)30,487 
Income taxes receivable/payable9,405
 24,739
 5,115
Income taxes receivable/payable(8,689)3,310 1,828 
Lease liabilitiesLease liabilities(85,147)(91,478)(88,597)
Other assets and other liabilities, net(26,973) (25,469) (12,265)Other assets and other liabilities, net(14,144)11,735 (33,655)
Other2,154
 1,137
 605
Other1,238 429 233 
Net Cash Provided by Operating Activities287,019
 268,055
 261,256
Net Cash Provided by Operating Activities202,426 210,663 165,164 
Cash Flows from Investing Activities     Cash Flows from Investing Activities   
Investments in certain businesses, net of cash acquired(111,546) (299,938) (245,084)Investments in certain businesses, net of cash acquired(351,882)(20,080)(179,421)
Purchases of property, plant and equipment(98,192) (60,358) (66,612)Purchases of property, plant and equipment(162,537)(69,591)(93,504)
Proceeds from sales of marketable equity securities66,741
 
 29,702
Proceeds from sales of marketable equity securities65,499 93,775 19,303 
Purchases of marketable equity securities(42,659) 
 (48,265)Purchases of marketable equity securities(48,036)(20,004)(7,499)
Advance related to Kaplan University transaction and loan to affiliate(28,061) (6,771) (14,244)
Net proceeds from sales of businesses, property, plant and equipment and other assetsNet proceeds from sales of businesses, property, plant and equipment and other assets10,295 225,570 54,495 
Investments in equity affiliates, cost method and other investments(11,702) (82,944) (6,273)Investments in equity affiliates, cost method and other investments(8,531)(12,367)(27,529)
Net (payments) proceeds from sales of businesses, property, plant and equipment and other assets(10,344) 3,265
 39,490
Return of investment in equity affiliates4,799
 4,727
 
Net Cash Used in Investing Activities(230,964) (442,019) (311,286)
Loans to related partyLoans to related party — (3,500)
OtherOther557 2,068 920 
Net Cash (Used in) Provided by Investing ActivitiesNet Cash (Used in) Provided by Investing Activities(494,635)199,371 (236,735)
Cash Flows from Financing Activities     Cash Flows from Financing Activities   
Repayments of borrowings and early redemption premium(417,159) (7,715) 
Net borrowings under revolving credit facilitiesNet borrowings under revolving credit facilities134,696 76,241 — 
Issuance of borrowings400,000
 
 98,610
Issuance of borrowings70,184 2,084 41,250 
Common shares repurchased(118,030) (50,770) (108,948)Common shares repurchased(55,683)(161,829)(2,103)
Repayments of borrowingsRepayments of borrowings(49,645)(83,360)(8,702)
Deferred payments of acquisitionsDeferred payments of acquisitions(30,866)(19,348)(2,255)
Dividends paid(28,617) (28,329) (27,325)Dividends paid(30,136)(29,970)(29,553)
Purchase of noncontrolling interest and deferred payment of acquisition(16,500) (5,187) (21,000)
Payments of financing costs(6,501) 
 (648)
(Repayments of) proceeds from bank overdrafts(5,717) (9,505) 14,429
Net (repayments of) proceeds from vehicle floor plan payableNet (repayments of) proceeds from vehicle floor plan payable(10,563)(14,160)14,384 
Issuance of noncontrolling interestIssuance of noncontrolling interest3,777 — 6,000 
Purchase of noncontrolling interestPurchase of noncontrolling interest(3,508)— (550)
Proceeds from (repayments of) bank overdraftsProceeds from (repayments of) bank overdrafts3,410 1,636 (185)
Proceeds from exercise of stock optionsProceeds from exercise of stock options 25,129 481 
Other165
 1,400
 1,805
Other(639)(425)(33)
Net Cash Used in Financing Activities(192,359) (100,106) (43,077)
Net Cash Provided by (Used in) Financing ActivitiesNet Cash Provided by (Used in) Financing Activities31,027 (204,002)18,734 
Effect of Currency Exchange Rate Change(7,147) 10,820
 (11,029)Effect of Currency Exchange Rate Change(3,029)2,978 2,766 
Net Decrease in Cash and Cash Equivalents and Restricted Cash(143,451) (263,250) (104,136)
Net (Decrease) Increase in Cash and Cash Equivalents and Restricted CashNet (Decrease) Increase in Cash and Cash Equivalents and Restricted Cash(264,211)209,010 (50,071)
Cash and Cash Equivalents and Restricted Cash at Beginning of Year407,566
 670,816
 774,952
Cash and Cash Equivalents and Restricted Cash at Beginning of Year423,054 214,044 264,115 
Cash and Cash Equivalents and Restricted Cash at End of Year$264,115
 $407,566
 $670,816
Cash and Cash Equivalents and Restricted Cash at End of Year$158,843 $423,054 $214,044 
Supplemental Cash Flow Information     Supplemental Cash Flow Information   
Cash paid during the year for:     Cash paid during the year for:   
Income taxes$54,000
 $4,000
 $65,000
Income taxes$39,000 $91,000 $28,000 
Interest$42,000
 $33,000
 $30,000
Interest$30,000 $31,000 $30,000 
See accompanying Notes to Consolidated Financial Statements.

72



GRAHAM HOLDINGS COMPANY
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCKHOLDERS’ EQUITY
(in thousands)
Class A
Common
Stock
Class B
Common
Stock
Capital in
Excess of
Par Value
Retained
Earnings
Accumulated Other Comprehensive Income
Treasury
Stock
Total Equity Redeemable Noncontrolling Interest(in thousands)Class A
Common
Stock
Class B
Common
Stock
Capital in
Excess of
Par Value
Retained
Earnings
Accumulated Other Comprehensive IncomeTreasury
Stock
Noncontrolling
Interest
Total EquityRedeemable Noncontrolling Interest
As of December 31, 2015$964
$19,036
$356,887
$5,447,677
$314,680
$(3,648,546)$2,490,698
 $25,957
As of December 31, 2018As of December 31, 2018$964 $19,036 $378,837 $6,236,125 $203,829 $(3,922,009)$— $2,916,782 $4,346 
Net income for the year  
169,458
  169,458
  Net income for the year 327,879  327,879 
Net income attributable to redeemable noncontrolling interests (868) (868) 868
Change in redemption value of redeemable noncontrolling interests (3,026) (3,026) 3,026
Dividends paid on common stock (27,325)  (27,325)  
Repurchase of Class B common stock    (108,948)(108,948)  
Issuance of Class B common stock, net of restricted stock award forfeitures (697)  644
(53)  
Amortization of unearned stock compensation and stock option expense 14,717
   14,717
  
Other comprehensive loss, net of income taxes (78,194) (78,194)  
Taxes arising from employee stock plans 558
   558
  
Purchase of redeemable noncontrolling interest 
 (24,031)
Exchange of redeemable noncontrolling interest (4,076) (4,076) (5,770)
As of December 31, 2016964
19,036
364,363
5,588,942
236,486
(3,756,850)2,452,941
 50
Net income for the year    302,489
  302,489
  
Issuance of noncontrolling interestIssuance of noncontrolling interest6,556 6,556 
Acquisition of redeemable noncontrolling interest    
 3,666
Acquisition of redeemable noncontrolling interest— 1,715 
Net loss attributable to noncontrolling interestNet loss attributable to noncontrolling interest152 (152)— 
Acquisition of noncontrolling interestAcquisition of noncontrolling interest1,153 1,153 
Net income attributable to redeemable noncontrolling interests (445) (445) 445
Net income attributable to redeemable noncontrolling interests(176)(176)176 
Change in redemption value of redeemable noncontrolling interests (446) (446) 446
Change in redemption value of redeemable noncontrolling interests32 32 (32)
Dividends paid on common stock (28,329)  (28,329)  Dividends paid on common stock (29,553) (29,553)
Repurchase of Class B common stock     (50,770)(50,770)  Repurchase of Class B common stock  (2,103) (2,103)
Issuance of Class B common stock, net of restricted stock award forfeitures (4,401)  4,786
385
  Issuance of Class B common stock, net of restricted stock award forfeitures (3,721)3,960  239 
Amortization of unearned stock compensation and stock option expense 11,184
   11,184
  Amortization of unearned stock compensation and stock option expense 6,521   6,521 
Other comprehensive income, net of income taxes 228,136
 228,136
  Other comprehensive income, net of income taxes99,466 99,466 
Reclassification of stranded tax effects as a result of tax reform (70,933)70,933
 
  
As of December 31, 2017964
19,036
370,700
5,791,724
535,555
(3,802,834)2,915,145
 4,607
Purchase of redeemable noncontrolling interestPurchase of redeemable noncontrolling interest— (550)
As of December 31, 2019As of December 31, 2019964 19,036 381,669 6,534,427 303,295 (3,920,152)7,557 3,326,796 5,655 
Net income for the year 271,408
  271,408
  Net income for the year   299,968  299,968 
Net income attributable to redeemable noncontrolling interests (202)  (202) 202
Net loss attributable to noncontrolling interestNet loss attributable to noncontrolling interest386 (386)— 
Acquisition of redeemable noncontrolling interestAcquisition of redeemable noncontrolling interest— 6,005 
Net loss attributable to redeemable noncontrolling interestsNet loss attributable to redeemable noncontrolling interests11 11 (11)
Change in redemption value of redeemable noncontrolling interests 413
 413
 (413)Change in redemption value of redeemable noncontrolling interests273 273 279 
Distribution to noncontrolling interestDistribution to noncontrolling interest(353)(353)
Dividends paid on common stock    (28,617)  (28,617)  Dividends paid on common stock (29,970) (29,970)
Repurchase of Class B common stock     (118,030)(118,030)  Repurchase of Class B common stock    (161,829) (161,829)
Issuance of Class B common stock, net of restricted stock award forfeitures (340)  (1,145)(1,485)  Issuance of Class B common stock, net of restricted stock award forfeitures (411)24,988  24,577 
Amortization of unearned stock compensation and stock option expense 8,064
   8,064
  Amortization of unearned stock compensation and stock option expense 6,901   6,901 
Other comprehensive loss, net of income taxes (136,837) (136,837)  
Cumulative effect of accounting change 
 
 
201,812
(194,889) 6,923
  
Other  
 
 (50)
As of December 31, 2018$964
$19,036
$378,837
$6,236,125
$203,829
$(3,922,009)$2,916,782
 $4,346
Other comprehensive income, net of income taxesOther comprehensive income, net of income taxes300,019 300,019 
As of December 31, 2020As of December 31, 2020964 19,036 388,159 6,804,822 603,314 (4,056,993)7,091 3,766,393 11,928 
Net income for the yearNet income for the year 353,327  353,327 
Noncontrolling interest capital contributionNoncontrolling interest capital contribution3,350 3,350 
Net income attributable to noncontrolling interestsNet income attributable to noncontrolling interests(1,943)1,943  
Acquisition of redeemable noncontrolling interestAcquisition of redeemable noncontrolling interest 6,617 
Net loss attributable to redeemable noncontrolling interestsNet loss attributable to redeemable noncontrolling interests 691  691 (691)
Change in redemption value of redeemable noncontrolling interestsChange in redemption value of redeemable noncontrolling interests292 257 549 (35)
Distribution to noncontrolling interestDistribution to noncontrolling interest(555)(555)
Dividends paid on common stockDividends paid on common stock    (30,136) (30,136)
Repurchase of Class B common stockRepurchase of Class B common stock    (55,683) (55,683)
Issuance of Class B common stock, net of restricted stock award forfeituresIssuance of Class B common stock, net of restricted stock award forfeitures (5,593) 4,654  (939)
Amortization of unearned stock compensation and stock option expenseAmortization of unearned stock compensation and stock option expense 6,598  6,598 
Other comprehensive income, net of income taxesOther comprehensive income, net of income taxes368,074 368,074 
Purchase of redeemable noncontrolling interestPurchase of redeemable noncontrolling interest (3,508)
As of December 31, 2021As of December 31, 2021$964 $19,036 $389,456 $7,126,761 $971,388 $(4,108,022)$12,086 $4,411,669 $14,311 
See accompanying Notes to Consolidated Financial Statements.

73



GRAHAM HOLDINGS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.ORGANIZATION AND NATURE OF OPERATIONS
1.    ORGANIZATION AND NATURE OF OPERATIONS
Graham Holdings Company (the Company), is a diversified education and media company. The Company’s Kaplan subsidiary provides a wide variety of educational services, both domestically and outside the United States.States (U.S.). The Company’s media operations comprise the ownership and operation of seven7 television broadcasting stations.
On March 22, 2018, Kaplan completed the sale of the institutional assets and operations of Kaplan University (KU) to an Indiana non-profit, public benefit corporation that is a subsidiary affiliated with Purdue University (Purdue) (see Note 3). The gain on the KU transaction is included in other income (expense), net, in the Consolidated Statement of Operations.
Education—Kaplan, Inc. provides an extensive range of educational services for students and professionals. Kaplan’s various businesses comprise four3 categories: Kaplan International, Higher Education (KHE), Test Preparation (KTP) and Professional (U.S.).Supplemental Education.
Media—The Company’s diversified media operations comprise television broadcasting, several websites and print publications, podcast content and a marketing solutions provider.
Television broadcasting. As of December 31, 2018,2021, the Company owned seven7 television stations located in Houston, TX; Detroit, MI; Orlando, FL; San Antonio, TX; Roanoke, VA; and two2 stations in Jacksonville, FL. All stations are network-affiliated except for WJXT in Jacksonville, FL.
Manufacturing—The Company’s manufacturing businesses include Hoover, Dekko, Joyce/Dayton and Forney.
Other—The Company’s other business operations include automotive dealerships, restaurants and entertainment venues, consumer internet brands, custom framing services and home health and hospice services and manufacturing.services.
2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation. The accompanying Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles (GAAP) in the United StatesU.S. and include the assets, liabilities, results of operations and cash flows of the Company and its majority-owned and controlled subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates. The preparation of financial statements in conformity with GAAP requires management to make estimates and judgments that affect the amounts reported in the financial statements. Management bases its estimates and assumptions on historical experience and on various other factors that are believed to be reasonable under the circumstances. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be affected by changes in those estimates. On an ongoing basis, the Company evaluates its estimates and assumptions.
The Company assessed certain accounting matters that generally require consideration of forecasted financial information, in context with the information reasonably available to the Company and the unknown future impacts of the novel coronavirus (COVID-19) pandemic as of December 31, 2021 and through the date of this filing. The accounting matters assessed included, but were not limited to, the Company’s carrying value of goodwill and other long-lived assets, allowance for doubtful accounts, inventory valuation and related reserves, fair value of financial assets, valuation allowances for tax assets and revenue recognition. Other than the goodwill and other long-lived asset impairment charges (see Notes 9, 12 and 19), there were no other impacts to the Company’s consolidated financial statements as of and for the year ended December 31, 2021 resulting from our assessments. The Company’s future assessment of the magnitude and duration of COVID-19, as well as other factors, could result in material impacts to the Company’s consolidated financial statements in future reporting periods.
Business Combinations. The purchase price of an acquisition is allocated to the assets acquired, including intangible assets, and liabilities assumed, based on their respective fair values at the acquisition date. Acquisition-related costs are expensed as incurred. The excess of the cost of an acquired entity over the net of the amounts assigned to the assets acquired and liabilities assumed is recognized as goodwill. The net assets and results of operations of an acquired entity are included in the Company’s Consolidated Financial Statements from the acquisition date.
Cash and Cash Equivalents. Cash and cash equivalents consist of cash on hand, short-term investments with original maturities of three months or less and investments in money market funds with weighted average maturities of three months or less.
Restricted Cash. Restricted cash represents amounts required to be held by non-U.S. higher education institutions for prepaid tuition pursuant to foreign government regulations. These regulations stipulate that the Company has a fiduciary responsibility to segregate certain funds to ensure these funds are only used for the benefit of eligible students.
74


Concentration of Credit Risk. Cash and cash equivalents are maintained with several financial institutions domestically and internationally. Deposits held with banks may exceed the amount of insurance provided on such deposits. Generally, these deposits may be redeemed upon demand and are maintained with financial institutions with investment-grade credit ratings. The Company routinely assesses the financial strength of significant customers, and this assessment, combined with the large number and geographical diversity of its customers, limits the Company’s concentration of risk with respect to trade accounts receivable.receivables from contracts with customers.


Allowance for Doubtful Accounts. Credit Losses. Accounts receivable have been reduced by an allowance for amounts that may be uncollectible inreflects the future. Thiscurrent expected credit losses associated with the receivables. The current expected credit losses are estimated allowance is based primarily on thehistorical write-offs, current macroeconomic conditions and reasonable and supportable forecasts of future economic conditions. Reserves are also established against specific receivables based on aging category, historical collection experience and management’s evaluation of the financial condition of the customer. The Company generally considers an account past due or delinquent when a student or customer misses a scheduled payment. The Company writes off accounts receivable balances deemed uncollectible against the allowance for doubtful accountscredit losses following the passage of a certain period of time, or generally when the account is turned over for collection to an outside collection agency.
Investments in Equity Securities. The Company measures its investments in equity securities at fair value with changes in fair value recognized in earnings. The Company elected the measurement alternative to measure cost method investments that do not have readily determinable fair value at cost less impairment, adjusted by observable price changes with any fair value changes recognized in earnings. If the fair value of an equity securitya cost method investment declines below its cost basis and the decline is considered other than temporary, the Company will record a write-down, which is included in earnings. The Company uses the average cost method to determine the basis of the securities sold.
Prior to 2018, the Company’s investments in marketable equity securities were classified as available-for-sale and, therefore, were recorded at fair value in the Consolidated Financial Statements, with the change in fair value during the period excluded from earnings and recorded net of income taxes as a separate component of other comprehensive income. Additionally, the Company used the cost method of accounting for its minority investments in nonpublic companies where it did not have significant influence over the operations and management of the investee. Investments were recorded at the lower of cost or fair value as estimated by management. Charges recorded to write down cost method investments to their estimated fair value and gross realized gains or losses upon the sale of cost method investments were included in other income (expense), net, in the Company’s Consolidated Statements of Operations. Fair value estimates were based on a review of the investees’ product development activities, historical financial results and projected discounted cash flows. The Company includes cost method investments in deferred charges and other assets in the Company’s Consolidated Balance Sheets.
Fair Value Measurements. Fair value measurements are determined based on the assumptions that a market participant would use in pricing an asset or liability based on a three-tiered hierarchy that draws a distinction between market participant assumptions based on (i) observable inputs, such as quoted prices in active markets (Level 1); (ii) inputs other than quoted prices in active markets that are observable either directly or indirectly (Level 2); and (iii) unobservable inputs that require the Company to use present value and other valuation techniques in the determination of fair value (Level 3). Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measure. The Company’s assessment of the significance of a particular input to the fair value measurements requires judgment and may affect the valuation of the assets and liabilities being measured and their placement within the fair value hierarchy.
For assets that are measured using quoted prices in active markets, the total fair value is the published market price per unit multiplied by the number of units held, without consideration of transaction costs. Assets and liabilities that are measured using significant other observable inputs are primarily valued by reference to quoted prices of similar assets or liabilities in active markets, adjusted for any terms specific to that asset or liability.
The Company measures certain assets—including goodwill; intangible assets; property, plant and equipment; lease right-of-use assets; cost and equity-method investments—at fair value on a nonrecurring basis when they are deemed to be impaired. The fair value of these assets is determined with valuation techniques using the best information available and may include quoted market prices, market comparables and discounted cash flow models.
Fair Value of Financial Instruments. The carrying amounts reported in the Company’s Consolidated Financial Statements for cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued liabilities, the current portion of deferred revenue and the current portion of debt approximate fair value because of the short-term nature of these financial instruments. The fair value of long-term debt is determined based on a number of observable inputs, including the current market activity of the Company’s publicly traded notes, trends in investor demands and market values of comparable publicly traded debt. The fair value of the interest rate hedge ishedges are determined based on a number of observable inputs, including time to maturity and market interest rates.
Inventories and Contracts in Progress. Inventories and contracts in progress are stated at the lower of cost or net realizable values and are based on the first-in, first-out (FIFO) method. Inventory costs include direct material, direct and indirect labor, and applicable manufacturing overhead. The Company allocates manufacturing overhead based on normal production capacity and recognizes unabsorbed manufacturing costs in earnings. The provision for excess and obsolete inventory is based on management’s evaluation of inventories on hand relative to historical usage, estimated future usage and technological developments.
Vehicle inventory is based on the specific identification method. The cost of new and used vehicle inventories includes the cost of any equipment added, reconditioning and transportation. In certain instances, vehicle manufacturers provide incentives which are reflected as a reduction in the carrying value of each vehicle purchased.
Property, Plant and Equipment. Property, plant and equipment is recorded at cost and includes interest capitalized in connection with major long-term construction projects. Replacements and major improvements are

75



capitalized; maintenance and repairs are expensed as incurred. Depreciation is calculated using the straight-line method over the estimated useful lives of the property, plant and equipment: 3 to 20 years for machinery and equipment; 20 to 50 years for buildings. The costs of leasehold improvements are amortized over the lesser of their useful lives or the terms of the respective leases.
Evaluation of Long-Lived Assets. The recoverability of long-lived assets and finite-lived intangible assets is assessed whenever adverse events or changes in circumstances indicate that recorded values may not be recoverable. A long-lived asset is considered to not be recoverable when the undiscounted estimated future cash flows are less than the asset’s recorded value. An impairment charge is measured based on estimated fair market value, determined primarily using estimated future cash flows on a discounted basis. Losses on long-lived assets to be disposed of are determined in a similar manner, but the fair market value would be reduced for estimated costs to dispose.
Goodwill and Other Intangible Assets. Goodwill is the excess of purchase price over the fair value of identified net assets of businesses acquired. The Company’s intangible assets with an indefinite life are principally from trade names and trademarks, franchise agreements and FCCFederal Communications Commission (FCC) licenses. Amortized intangible assets are primarily student and customer relationships and trade names and trademarks, with amortization periods up to 1015 years. Costs associated with renewing or extending intangible assets are insignificant and expensed as incurred.
The Company reviews goodwill and indefinite-lived intangible assets at least annually, as of November 30, for possible impairment. Goodwill and indefinite-lived intangible assets are reviewed for possible impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit or indefinite-lived intangible asset below its carrying value. The Company tests its goodwill at the reporting unit level, which is an operating segment or one level below an operating segment. The Company initially assesses qualitative factors to determine if it is necessary to perform the goodwill or indefinite-lived intangible asset quantitative impairment review. The Company reviews the goodwill and indefinite-lived assets for impairment using the quantitative process if, based on its assessment of the qualitative factors, it determines that it is more likely than not that the fair value of a reporting unit or indefinite-lived intangible asset is less than its carrying value, or if it decides to bypass the qualitative assessment. The Company reviews the carrying value of goodwill and indefinite-lived intangible assets utilizing a discounted cash flow model, and, where appropriate, a market value approach is also utilized to supplement the discounted cash flow model. The Company makes assumptions regarding estimated future cash flows, discount rates, long-term growth rates and market values to determine the estimated fair value of each reporting unit and indefinite-lived intangible asset. If these estimates or related assumptions change in the future, the Company may be required to record impairment charges.
Investments in Affiliates.The Company uses the equity method of accounting for its investments in and earnings or losses of affiliates that it does not control, but over which it exerts significant influence. Significant influence is generally deemed to exist if the Company has an ownership interest in the voting stock of an investee between 20% and 50%. The Company also uses the equity method of accounting for its investments in a partnership or limited liability company with specific ownership accounts, if the Company has an ownership interest of 3% or more. The Company considers whether the fair values of any of its equity method investments have declined below their carrying values whenever adverse events or changes in circumstances indicate that recorded values may not be recoverable. If the Company considered any such decline to be other than temporary (based on various factors, including historical financial results, product development activities and the overall health of the affiliate’s industry), a write-down would be recorded to estimated fair value.
Revenue Recognition. Prior to the adoption of the new revenue guidance on January 1, 2018, the Company recognized revenue when persuasive evidence of an arrangement existed, the fees were fixed or determinable, the product or service had been delivered and collectability was assured. The Company considered the terms of each arrangement to determine the appropriate accounting treatment.
Subsequent to the adoption of the new guidance, the Company identifies a contract for revenue recognition when there is approval and commitment from both parties, the rights of the parties and payment terms are identified, the contract has commercial substance and the collectability of consideration is probable. The Company evaluates each contract to determine the number of distinct performance obligations in the contract, which requires the use of judgment.
Education Revenue. Education revenue is primarily derived from postsecondary education professionaland supplementary education and test preparation services provided both domestically and abroad. Generally, tuition and other fees are paid upfront and recorded in deferred revenue in advance of the date when education services are provided to the student. In some instances, installment billing is available to students, which reduces the amount of cash consideration received in advance of performing the service. The contractual terms and conditions associated with installment billing indicate that the student is liable for the total contract price; therefore, mitigating the Company’s exposure to losses associated with nonpayment. The Company determined the installment billing does not represent a significant financing component.
Kaplan International. Kaplan International provides higher education, professional education, and test preparation services and materials to students primarily in the United Kingdom (U.K.), Singapore, and Australia. Some Kaplan


International contracts consist of one1 performance obligation that is a combination of indistinct promises to the student, while other Kaplan International contracts include multiple performance obligations as the promises in the
76


contract are capable of being both distinct and distinct within the context of the contract. OneNaN Kaplan International business offers an option whereby students receive future services at a discount that is accounted for as a material right.
The transaction price is stated in the contract and known at the time of contract inception; therefore, no variable consideration exists. Revenue is allocated to each performance obligation based on its standalone selling price. Any discounts within the contract are allocated across all performance obligations unless observable evidence exists that the discount relates to a specific performance obligation or obligations in the contract. Kaplan International generally determines standalone selling prices based on prices charged to students.
Revenue is recognized ratably over the instruction period or access period for higher education, professional education and test preparation services. Kaplan International generally uses the time elapsed method, an input measure, as it best depicts the simultaneous consumption and delivery of these services. Course materials determined to be a separate performance obligation are recognized at the point in time when control transfers to the student, generally when the products are delivered to the student.
Higher Education (KHE). In the first quarterNaN Kaplan International business has a contract with a customer consisting of 2018, KHE provided postsecondary education services to students through KU’s online programs and fixed-facility colleges.
These contracts consisted either of one performance obligation that is a combination of distinct promises to a student, or two2 performance obligations if the student also enrolled in the Kaplan Tuition Cap, which established a maximum amountconsisted entirely of tuition that KHE may charge students for higher education services. The Kaplan Tuition Cap was accounted for as a material right. The transaction price of a higher education contract was stated in the contract and known at the time of contract inception; therefore, no variable consideration existed. A portion of the transaction price was allocatedat contract inception. The Company allocates revenue to the material right, if applicable,each performance obligation based on the expected value method.
Higher educationcost plus a margin. The margin was determined by a market assessment. Revenue is recognized over time, using an input method, as the customer simultaneously benefits from the services revenue was recognized ratably over the instruction period.as delivery occurs. The Company usedrecords a contract asset associated with this Kaplan International contract as the time elapsed method, an input measure, as it best depictsright to revenue is dependent on something other than the simultaneous consumption and deliverypassage of higher education services.time.
On March 22, 2018, Kaplan contributed the institutional assets and operations of KU to Purdue University Global (see Note 3)Higher Education (KHE). Subsequent to the transaction, KHE primarily provides non-academic operations support services to Purdue University Global (Purdue Global) pursuant to a Transition and Operations Support Agreement (TOSA). This contract has a 30-year term and consists of one1 performance obligation, which represents a series of daily promises to provide support services to Purdue University Global. The transaction price is entirely made up of variable consideration related to the reimbursement of KHE support costs and the KHE fee. The TOSA outlines a payment structure, which dictates how cash will be distributed at the end of Purdue University Global’s fiscal year, which is the 30th of June. The collectability of the KHE support costs and KHE fee is entirely dependent on the availability of cash at the end of the fiscal year. This variable consideration is constrained based on fiscal year forecasts prepared for Purdue University Global. The forecasts are updated throughout the fiscal year until the uncertainty is ultimately resolved, which is at the end of each Purdue University Global fiscal year. As KHE’s performance obligation is made up of a series, the variable consideration is allocated to the distinct service period to which it relates, which is the Purdue University Global fiscal year.
Support services revenue is recognized over time based on the expenses incurred to date and the percentage of expected reimbursement. KHE fee revenue is also recognized over time based on the amount of Purdue University Global revenue recognized to date and the percentage of fee expected to be collected for the fiscal year. The Company used these input measures as Purdue University Global simultaneously receives and consumes the benefits of the services provided by KHE.
Kaplan Test Preparation (KTP)Supplemental Education. KTPSupplemental Education offers test preparation services and materials to students, related to pre-college, graduate, health and bar review products. Generally KTP contracts include promises for test preparation services and course materials. As each promise is both capable of being distinct and distinct in the context of the contract, each promise is accounted for as a separate performance obligation. As the transaction price is stated in the contract and known at the time of contract inception, no variable consideration exists. Revenue is allocated to each performance obligation based on its standalone selling price. KTP generally determines standalone selling prices based on prices charged to students. Any discounts within the contract are allocated across all performance obligations unless observable evidence exists that the discount relates to a specific performance obligation or obligations in the contract.
Test preparation services revenue is recognized ratably over the period of access. At KTP, an estimate of average access period is developed for each course, and this estimate is evaluated on an ongoing basis and adjustedwell as necessary. KTP generally uses the time elapsed method, an input measure, as it best depicts the simultaneous


consumption and availability of access to test preparation services. Revenue associated with distinct course materials is recognized at the point in time when control transfers to the student, generally when the products are delivered to the student.
KTP offers a guarantee on certain courses that gives students the ability to repeat a course if they are not satisfied with their exam score. The Company accounts for this guarantee as a separate performance obligation.
Professional (U.S.): Professional (U.S.) provides professional training and exam preparation for professional certifications and licensures to students. Professional (U.S.) contracts include promises for professional education services and course materials. Generally, Professional (U.S.) revenueSupplemental Education contracts consist of multiple performance obligations as eachpromises for these services are distinct promise is both capable of being distinct and distinct inwithin the context of the contract. The transaction price is stated in the contract and known at the time of contract inception, therefore no variable consideration exists. Revenue is allocated to each performance obligation based on its standalone selling price. Professional (U.S.)Supplemental Education generally determines standalone selling prices based on the prices charged to students.students and professionals. Any discounts within the contract are allocated across all performance obligations unless observable evidence exists that the discount relates to a specific performance obligation or obligations in the contract.
Professional educationSupplemental Education services revenue is recognized ratably over the period of access. Professional (U.S.) generally usesaccess to the education materials. An estimate of the average access period is developed for each course, and this estimate is evaluated on an ongoing basis and adjusted as necessary. The time elapsed method, an input measure, is used as it best depicts the simultaneous consumption and availability of access to professional educationthe services. Revenue associated with distinct course materials is recognized at the point in time when control transfers to the student, generally when the products are delivered to the student.
Supplemental Education offers a guarantee on certain courses that gives students the ability to repeat a course if they are not satisfied with their exam score. The Company accounts for this guarantee as a separate performance obligation.
Television Broadcasting Revenue. Television broadcasting revenue at Graham Media Group (GMG) is primarily comprised of television and internet advertising revenue, and retransmission revenue.
77


Television Advertising Revenue. GMG accounts for the series of advertisements included in television advertising contracts as one1 performance obligation and recognizes advertising revenue over time. The Company elected the right to invoice practical expedient, an output method, as GMG has the right to consideration that equals the value provided to the customer for advertisements delivered to date. As a result of the election to use the right to invoice practical expedient, GMG does not determine the transaction price or allocate any variable consideration at contract inception. Rather, GMG recognizes revenue commensurate with the amount to which GMG has the right to invoice the customer. Payment is typically received in arrears within 60 days of revenue recognition.
Retransmission Revenue. Retransmission revenue represents compensation paid by cable, satellite and other multichannel video programming distributors (MVPDs) to retransmit GMG’s stations’ broadcasts in their designated market areas. The retransmission rights granted to MVPDs are accounted for as a license of functional intellectual property as the retransmitted broadcast provides significant standalone functionality. As such, each retransmission contract with an MVPD includes one1 performance obligation for each station’s retransmission license. GMG recognizes revenue using the usage-based royalty method, in which revenue is recognized in the month the broadcast is retransmitted based on the number of MVPD subscribers and the applicable per user rate identified in the retransmission contract. Payment is typically received in arrears within 60 days of revenue recognition.
Manufacturing Revenue. Manufacturing revenue consists primarily of product sales generated by four4 businesses: Hoover, Dekko, Joyce, and Forney. The Company has determined that each item ordered by the customer is a distinct performance obligation as it has standalone value and is distinct within the context of the contract. For arrangements with multiple performance obligations, the Company initially allocates the transaction price to each obligation based on its standalone selling price, which is the retail price charged to customers. Any discounts within the contract are allocated across all performance obligations unless observable evidence exists that the discount relates to a specific performance obligation or obligations in the contract.
The Company sells some products and services with a right of return. This right of return constitutes variable consideration and is constrained from revenue recognition on a portfolio basis, using the expected value method until the refund period expires.
The Company recognizes revenue when or as control transfers to the customer. Some manufacturing revenue is recognized ratably over the manufacturing period, if the product created for the customer does not have an alternative use to the Company and the Company has an enforceable right to payment for performance completed to date. The determination of the method by which the Company measures its progress toward the satisfaction of its performance obligations requires judgment. The Company measures its progress for these products using the units delivered method, an output measure. These arrangements represented 27%21%, 23% and 28% of the manufacturing revenue recognized for the yearyears ended December 31, 2018.2021, 2020 and 2019, respectively.
Other manufacturing revenue is recognized at the point in time when control transfers to the customer, generally when the products are shipped. Some customers have a bill and hold arrangement with the Company. Revenue for bill and hold arrangements is recognized when control transfers to the customer, even though the customer does


not have physical possession of the goods. Control transfers when the bill-and-hold arrangement has been requested from the customer, the product is identified as belonging to the customer and is ready for physical transfer, and the product cannot be directed for use by anyone but the customer.
Payment terms and conditions vary by contract, although terms generally include a requirement of payment within 90 days of delivery.
The Company evaluated the terms of the warranties and guarantees offered by its manufacturing businesses and determined that these should not be accounted for as a separate performance obligation as a distinct service is not identified.
Healthcare Revenue. The Company contracts with patients to provide home health or hospice services. Payment is typically received from third-party payors such as Medicare, Medicaid, and private insurers. The payor is a third party to the contract that stipulates the transaction price of the contract. The Company identifies the patient as the party who benefits from its healthcare services and as such, the patient is its customer.
The Company determined thatCenters for Medicare and Medicaid Services released a revised reimbursement structure under the Patient Driven Groupings Model (PDGM) for Medicare claims for home healthcare services effective for new and modified revenue contracts beginning on or after January 1, 2020. Home health services contracts generally have one1 performance obligation to provide healthcarehome health services to patients. The transaction price reflectsUnder the amount of revenuePDGM model, the Company expectsrecognizes revenue using the right to receive in exchange for providing these services. Asinvoice practical expedient, an output method, as the contractual right to revenue corresponds directly with the transfer of services to the patient. Given the election of the practical expedient, the Company does not determine the transaction price for healthcare services is known at the time of contract inception, noor allocate any variable consideration exists. Healthcareat contract inception. Rather, the Company recognizes revenue commensurate with the amount to which it has the right to invoice the customer, which is recognized ratably overa function of the periodaverage length of care. The Company generally usesstay within each of the time-elapsed method, an input measure as it best depicts the simultaneous delivery and consumption of healthcare services.two 30 day payment
78


periods. Payment is typically received from third-party payorsMedicare within 6030 days after a claim is filed, or in some cases in two installments, one during the contract and one after the services have been provided.filed. Medicare is the most common third-party payor.payor for home health services.
Home health revenue contracts may be modified to account for changes in the patient’s plan of care. The Company identifies contract modifications when the modification changes the existing enforceable rights and obligations. As modifications to the plan of care modify the original performance obligation, the Company accounts for the contract modification as an adjustment to revenue (either as an increase in or a reduction of revenue) on a cumulative catch-up basis.
Hospice services contracts generally have 1 performance obligation to provide healthcare services to patients. The transaction price reflects the amount of revenue the Company expects to receive in exchange for providing these services. As the transaction price for healthcare services is known at the time of contract inception, no variable consideration exists. Hospice service revenue is recognized ratably over the period of care. The Company generally uses the time-elapsed method, an input measure as it best depicts the simultaneous delivery and consumption of healthcare services. Payment is received from third-party payors for hospice services within 60 days after a claim is filed, or in some cases in two installments, one during the contract and one after the services have been provided. Medicare is the most common third-party payor.
Other Revenue. The Company recognizes revenue associated with management services it provides to its affiliates. The Company accounts for the management services provided as one1 performance obligation and recognizes revenue over time as the services are delivered. The Company uses the right to invoice practical expedient, an output method, as the Company’s right to revenue corresponds directly with the value delivered to the affiliate. As a result of the election to use the right to invoice practical expedient, the Company does not determine the transaction price or allocate any variable consideration at contract inception. Rather, the Company recognizes revenue commensurate with the amount to which it has the right to invoice the affiliate, which is based on contractually identified percentages. Payment is received monthly in arrears.
SocialCodeAutomotive Revenue.The automotive subsidiary generates revenue primarily through the sale of new and used vehicles, the arrangement of vehicle financing, insurance and other service contracts (F&I revenue) and the performance of vehicle repair and maintenance services.
New and used vehicle revenue contracts generally contain 1 performance obligation to deliver the vehicle to the customer in exchange for the stated contract consideration. Revenue is recognized at the point in time when control of the vehicle passes to the customer. F&I revenue is recognized at the point in time when the agreement between the customer and financing, insurance or service provider is executed. As the automotive subsidiary acts as an agent in these F&I revenue transactions, revenue is recognized net of any financing, insurance and service provider costs. Repair and maintenance services revenue is recognized over time, as the service is performed.
Other Revenue. SocialCodeRestaurant Revenue. Restaurant revenues consists of sales generated by Clyde’s Restaurant Group (CRG). Food and beverage revenue, net of discounts and taxes, is recognized at the point in time when it is delivered to the customer. Proceeds from the sale of gift cards are recorded as deferred revenue and recognized as revenue upon redemption by the customer.
Custom Framing Services Revenue. Framebridge sells custom framing solutions to customers. Custom framing services revenue, net of discounts and taxes, is recognized when the products are delivered to the customer. Proceeds from the sale of gift cards are recorded as deferred revenue and recognized as revenue upon redemption by the customer.
Code3 Revenue. Code3 generates media management revenue in exchange for providing social media marketing solutions to its clients. The Company determined that SocialCodeCode3 contracts generally have one1 performance obligation made up of a series of promises to manage the client’s media spend on advertising platforms for the duration of the contract period.
SocialCodeCode3 recognizes revenue, net of media acquisition costs, over time as media management services are delivered to the customer. Generally, SocialCodeCode3 recognizes revenue using the right to invoice practical expedient, an output method, as SocialCode’sCode3’s right to revenue corresponds directly with the value delivered to its customer. As a result of the election to use the right to invoice practical expedient, SocialCodeCode3 does not determine the transaction price or allocate any variable consideration at contract inception. Rather, SocialCodeCode3 recognizes revenue commensurate with the amount to which it has the right to invoice the customer which is a function of the cost of social media placement plus a management fee, less any applicable discounts. Payment is typically received within 100 days of revenue recognition.
SocialCodeCode3 evaluates whether it is the principal (i.e. presents revenue on a gross basis) or agent (i.e. presents revenue on a net basis) in its contracts. SocialCodeCode3 presents revenue for media management services, net of media acquisition costs, as an agent, as SocialCodeCode3 does not control the media before placement on social media platforms.
79


Leaf Group Revenue. Leaf Group (Leaf) generates revenue through its media and marketplace businesses. Media revenue is primarily derived from advertisements displayed on Leaf’s online media properties. Revenue is recognized over time as the performance obligation is delivered. Revenue is generally recognized based on an output measure including impressions delivered, cost per click or time-based advertisements.
Marketplace revenue is primarily derived from the sale of products from Society6 and Saatchi Art Group. Each product ordered generally is accounted for as an individual performance obligation. Product revenue, net of discounts and taxes, is recognized when control of the promised good is transferred to the customer.
Other Revenue.Revenue. Other revenue primarily includes advertising, circulation and circulationsubscription revenue from Slate, PanoplyMegaphone, Decile, Pinna and Foreign Policy. The Company accounts for other advertising revenues consistently with the advertising revenue streams addressed above. Circulation revenue consists of fees that provide customers access to online and print publications. The Company recognizes circulation and subscription revenue ratably over the subscription period beginning on the


date that the publication or product is made available to the customer. Circulation revenue contracts are generally annual or monthly subscription contracts that are paid in advance of delivery of performance obligations.
Revenue Policy Elections. The Company has elected to account for shipping and handling activities that occur after the customer has obtained control of the good as a fulfillment cost rather than as an additional promised service. Therefore, revenue for these performance obligations is recognized when control of the good transfers to the customer, which is when the good is ready for shipment. The Company accrues the related shipping and handling costs over the period when revenue is recognized.
The Company has elected to exclude from the measurement of the transaction price all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by the entity from a customer.
Revenue Practical Expedients. The Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less, (ii) contracts for which the amount of revenue recognized is based on the amount to which the Company has the right to invoice the customer for services performed, (iii) contracts for which the consideration received is a usage-based royalty promised in exchange for a license of intellectual property and (iv) contracts for which variable consideration is allocated entirely to a wholly unsatisfied promise to transfer a distinct good or service that forms part of a single performance obligation.
Costs to Obtain a Contract. The Company incurs costs to obtain a contract that are both incremental and expected to be recovered as the costs would not have been incurred if the contract was not obtained and the revenue from the contract exceeds the associated cost. The revenue guidance provides a practical expedient to expense sales commissions as incurred in instances where the amortization period is one year or less. The amortization period is defined in the guidance as the contract term, inclusive of any expected contract renewal periods. The Company has elected to apply this practical expedient to all contracts except for contracts in its education division. In the education division, costs to obtain a contract are amortized over the applicable amortization period except for cases in which commissions paid on initial contracts and renewals are commensurate. The Company amortizes these costs to obtain a contract on a straight linestraight-line basis over the amortization period. These expenses are included as operating expensescost of services or products in the Company’s Consolidated Statements of Operations.
Leases. The Company has operating leases for substantially all of its educational facilities, corporate offices and enters into various other lease agreementsfacilities used in conducting its business. At the inception of eachbusiness, as well as certain equipment. The Company determines if an arrangement is a lease the Company evaluates the lease agreement to determine whether the lease is an operating or capital lease. Additionally, many of the Company’s lease agreements contain renewal options, tenant improvement allowances, rent holidays and/or rent escalation clauses. When such itemsat inception. Operating leases are included in a lease agreement, the Company records a deferred rent asset or liability in the Consolidated Financial Statementsright-of-use (ROU) assets, current portion of lease liabilities, and records these items in rent expense evenly over the terms of the lease.
The Company is also required to make additional payments under operating lease terms for taxes, insurance and other operating expenses incurred during the operating lease period; such items are expensed as incurred. Rental deposits are included as other assets inliabilities on the Company’s Consolidated Balance SheetsSheets. ROU assets represent the Company’s right to use an underlying asset for the lease agreements that requireterm and lease liabilities represent the Company’s obligation to make lease payments in advance or deposits held for security thatarising from the lease. Operating lease ROU assets and liabilities are refundable, less any damages,recognized at the endlease commencement date based on the present value of lease payments over the lease term. ROU assets also include any initial direct costs, prepaid lease payments and lease incentives received, when applicable. As most of the respective lease.Company’s leases do not provide an implicit rate, the Company used its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of lease payments. The Company used the incremental borrowing rate on December 31, 2018 for operating leases that commenced prior to that date.
The Company’s lease terms may include options to extend or terminate the lease by one to 10 years or more when it is reasonably certain that the option will be exercised. Leases with a term of twelve months or less are not recorded on the balance sheet; however, lease expense for these leases is recognized on a straight-line basis. The Company has elected the practical expedient to not separate lease components from nonlease components. As such, lease expense includes these nonlease components, when applicable. Fixed lease expense is recognized on a straight-line basis over the lease term. Variable lease expense is recognized when incurred. The Company’s lease
80


agreements do not contain any significant residual value guarantees or restrictive covenants. In some instances, the Company subleases its leased real estate facilities to third parties.
As of December 31, 2021 and 2020, the Company had $4.0 million and $5.9 million, respectively, in net, property, plant and equipment and current finance lease liabilities related to service loaner vehicles at the automotive subsidiary. Service loaner vehicles are generally purchased from the lessor within six months of contract commencement and upon purchase the vehicles are placed into used vehicle inventory at cost. The Company does not have any other significant financing leases.
Pensions and Other Postretirement Benefits. The Company maintains various pension and incentive savings plans. Most of the Company’s employees are covered by these plans. The Company also provides healthcare and life insurance benefits to certain retired employees. These employees become eligible for benefits after meeting age and service requirements.
The Company recognizes the overfunded or underfunded status of a defined benefit postretirement plan as an asset or liability in its Consolidated Balance Sheets and recognizes changes in that funded status in the year in which the changes occur through comprehensive income. The Company measures changes in the funded status of its plans using the projected unit credit method and several actuarial assumptions, the most significant of which are the discount rate, the expected return on plan assets and the rate of compensation increase. The Company uses a measurement date of December 31 for its pension and other postretirement benefit plans.
Self-Insurance. The Company uses a combination of insurance and self-insurance for a number of risks, including claims related to employee healthcare and dental care, disability benefits, workers’ compensation, general liability, property damage and business interruption. Liabilities associated with these plans are estimated based on, among other things, the Company’s historical claims experience, severity factors and other actuarial assumptions. The expected loss accruals are based on estimates, and, while the Company believes that the amounts accrued are adequate, the ultimate loss may differ from the amounts provided.
Income Taxes. The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been


included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.
The Company records net deferred tax assets to the extent that it believes these assets will more likely than not be realized. In making such determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations; this evaluation is made on an ongoing basis. In the event the Company were to determine that it was able to realize net deferred income tax assets in the future in excess of their net recorded amount, the Company would record an adjustment to the valuation allowance, which would reduce the provision for income taxes.
The Company recognizes a tax benefit from an uncertain tax position when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. The Company records a liability for the difference between the benefit recognized and measured for financial statement purposes and the tax position taken or expected to be taken on the Company’s tax return. Changes in the estimate are recorded in the period in which such determination is made.
Foreign Currency Translation. Income and expense accounts of the Company’s non-United Statesnon-U.S. operations where the local currency is the functional currency are translated into United States (U.S.)U.S. dollars using the current rate method, whereby operating results are converted at the average rate of exchange for the period, and assets and liabilities are converted at the closing rates on the period end date. Gains and losses on translation of these accounts are accumulated and reported as a separate component of equity and other comprehensive income. Gains and losses on foreign currency transactions, including foreign currency denominated intercompany loans on entities with a functional currency in U.S. dollars, are recognized in the Consolidated Statements of Operations.
Equity-Based Compensation. The Company measures compensation expense for awards settled in shares based on the grant date fair value of the award. The Company measures compensation expense for awards settled in cash, or that may be settled in cash, based on the fair value at each reporting date. The Company recognizes the expense over the requisite service period, which is generally the vesting period of the award. Stock award forfeitures are accounted for as they occur.
Earnings Per Share. Basic earnings per share is calculated under the two-class method. The Company treats restricted stock as a participating security due to its nonforfeitable right to dividends. Under the two-class method, the Company allocates to the participating securities their portion of dividends declared and undistributed earnings
81


to the extent the participating securities may share in the earnings as if all earnings for the period had been distributed. Basic earnings per share is calculated by dividing the income available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated similarly except that the weighted average number of common shares outstanding during the period includes the dilutive effect of the assumed exercise of options and restricted stock issuable under the Company’s stock plans. The dilutive effect of potentially dilutive securities is reflected in diluted earnings per share by application of the treasury stock method.
Mandatorily Redeemable Noncontrolling Interest.  The Company’s mandatorily redeemable noncontrolling interest representedrepresents the noncontrolling interest in GHC One LLC (GHC One), a subsidiary of Graham Healthcare Group (GHG), which was 90% owned.. The minority shareholders had an option to putmust liquidate their shares to the Company starting5% interest in 2020 and wereGHC One upon its required to put a percentage of their shares in 2022 and 2024, with the remaining shares required to be put by the minority shareholdersliquidation in 2026. Since the noncontrollingThis interest was mandatorily redeemable by 2026, it wasis reported as a noncurrent liability at December 31, 20172021 and 2020 in the Consolidated Balance Sheets. The Company presentedpresents this liability at fair value, which wasis computed annually asquarterly at the current redemption value. Changes in the redemption value wereis recorded as interest expense or income in the Company’s Consolidated StatementsStatement of Operations. The mandatorily redeemable noncontrolling interest was redeemed and paid in July 2018 (see Note 3).
Redeemable Noncontrolling Interest.  The Company’s redeemable noncontrolling interest represents the noncontrolling interest in Hoover,CSI Pharmacy Holding Company, LLC (CSI), which is 97.72%75% owned, Framebridge, which is 93.4% owned, and Weiss, which is 50.1% owned. TheCSI’s minority shareholders have an optionmay put up to put some50% of their shares to the Company startingCompany. The first put period begins in 2019 and the remaining2022. A second put period for another tranche of shares startingbegins in 2021.2024. The Companyminority shareholder of Framebridge has an option to buyput 20% of the shares to the Company annually starting in 2024. The minority shareholder of Weiss has an option to put 10% of the shares to the Company annually starting in 2026 and may put all of the shares starting in 2033. In March 2021, Hoover’s minority shareholders starting in 2027.put the remaining outstanding shares to the Company. Following the redemption, the Company owns 100% of Hoover. Prior to the redemption, the Company owned 98.01% of Hoover. The Company presents the redeemable noncontrolling interestinterests at the greater of its carrying amount or redemption value at the end of each reporting period in the Consolidated Balance Sheets. Changes in the redemption value are recorded to capital in excess of par value in the Company’s Consolidated Balance Sheets.
Comprehensive Income. Comprehensive income consists of net income, foreign currency translation adjustments, net changes in cash flow hedge,hedges, and pension and other postretirement plan adjustments.


Recently Adopted and Issued Accounting Pronouncements. In May 2014, the Financial Accounting Standards Board (FASB) issued comprehensive new guidance that supersedes all existing revenue recognition guidance. In August 2015,March 2020, the FASB issued an amendmentguidance providing optional practical expedients and exceptions to ease the guidance that deferspotential accounting impacts associated with the effective datediscontinuation of the London Interbank Offered Rate (LIBOR) or by one year. The new guidance requires revenueother reference rates expected to be recognized when the Company transfers promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. The new guidance also significantly expands the disclosure requirements for revenue recognition. The guidance is effective for interim and fiscal years beginning after December 15, 2017. The standard permits two implementation approaches, full retrospective, requiring retrospective application of the new guidance with a restatement of prior years, or modified retrospective, requiring prospective application of the new guidance with disclosure of results under the old guidance in the first year of adoption.discontinued. The Company adopted the new guidance on January 1, 2018, using the modified retrospective approach for contracts not completed as of the adoption date.
Upon adoption of the new guidance, the Company recorded a net increase to the opening balance of retained earnings of $6.9 million. This adjustment was driven by changescontract modification practical expedient in the timingfourth quarter of recognition of both revenues and expenses. A change in revenue recognition at a manufacturing business resulted2021 as it is in the accelerationprocess of revenue and associated expenses as revenue is now recognized over time versus atmodifying any contracts that reference a point in time. A change in the contract term at an education business resulted in a different revenue recognition pattern from previous recognition. Finally, the Company’s treatment of certain commissions paid to employees and agents at its education division changed. The Company previously expensed such commissions as incurred. Upon adoption of the newdiscontinuing reference rate. This guidance the Company capitalizes certain commission costs as an incremental cost of obtaining a contract and, subsequently, amortizes the cost as the tuition services are delivered to students.
The cumulative effect of the changes to the Company’s Consolidated Balance Sheets as a result of adopting the new guidance was as follows:
(in thousands)Balance as of December 31, 2017AdjustmentsBalance as of January 1, 2018
Assets   
Accounts receivable, net$620,319
$2,142
$622,461
Inventories and contracts in progress60,612
246
60,858
Other current assets66,253
6,343
72,596
Liabilities   
Accounts payable and accrued liabilities$526,323
$88
$526,411
Deferred revenue339,454
(346)339,108
Deferred income taxes362,701
2,066
364,767
Equity   
Retained earnings$5,791,724
$6,923
$5,798,647
Under the modified retrospective method of adoption, the Company is required to disclose the impact the adoption of the revenue guidance had on its Consolidated Statements of Operations. Under the previous guidance, KU’s fee revenue with Purdue University Global is not fixed and determinable until the end of Purdue University Global’s fiscal year (see Note 3). As a result, the Company would report $4.5 million less revenue and operating income. If the Company continuedexpected to follow its accounting policies under the previous guidance for all other revenue streams, revenue and expenses would be $1.7 million and $0.6 million lower, respectively, for the year ended December 31, 2018. This is primarily due to the net impact of the change in the timing of the recognition of revenue and costs to obtain a contract.
In January 2016, the FASB issued new guidance that substantially revises the recognition, measurement and presentation of financial assets and financial liabilities. The new guidance, among other things, requires (i) equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income, with some exceptions; (ii) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; (iii) requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; (iv) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements; and (v) clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. The guidance is effective for interim and fiscal years beginning after December 15, 2017.
The Company adopted this guidance in the first quarter of 2018 and recorded a cumulative adjustment of $194.9 million to retained earnings on its Consolidated Balance Sheet related to unrealized gains of available-for-sale


securities, net of tax, previously classified within accumulated other comprehensive income. Results for reporting periods beginning after January 1, 2018 are presented under this new guidance with any changes in fair value recognized in net income. In addition, the Company elected the measurement alternative to measure cost method investments that do not have a readily determinable fair value at cost less impairment, adjusted by observable price changes with any fair value changes recognized in net income.
In February 2016, the FASB issued new guidance that requires, among other things, a lessee to recognize a right-of-use asset representing an entity’s right to use the underlying asset for the lease term and a liability for lease payments on its balance sheet, regardless of classification of a lease as operating or financing. For leases with a term of twelve months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and liabilities and account for the lease similar to existing guidance for operating leases today. This new guidance supersedes all prior guidance. The guidance is effective for interim and fiscal years beginning after December 15, 2018. Early adoption is permitted. The standard provides two methods of adoption under the modified retrospective approach. Under the comparative date method, lessees and lessors are required to recognize and measure leases as of the beginning of the earliest period presented. Under the effective date method, lessees and lessors are required to recognize and measure leases as of the period of adoption. The Company will adopt the new guidance using the effective date method on January 1, 2019.
The Company expects to elect the available package of transition practical expedients, and the use of hindsight to determine the lease term. Additionally, the Company expects to elect the short-term lease recognition exemption, and the practical expedient not to separate non-lease components from the lease components to which they relate. The guidance will have a materialsignificant impact on the Company’s Consolidated Balance Sheet, but will not impact the Company’s results of operations. The most significant impact will be the recognition of right-of-use assets and lease liabilities for operating leases.
The Company has substantially completed its evaluation of the impact of adopting the new guidance, as well as its assessment of the need for any changes to the Company’s accounting policies and internal control structure. As a result, the Company will implement new processes and internal controls to enable the preparation of financial information on adoption. The Company is finalizing its evaluation of new disclosures required by the guidance to determine additional information that will need to be disclosed, including weighted average remaining lease term, and weighted average remaining discount rate.
In March 2017, the FASB issued new guidance that changes the presentation of net periodic pension cost and net periodic postretirement benefit cost for defined benefit plans. The guidance requires an issuer to disaggregate the service cost component of net periodic pension and postretirement benefit cost from other components. Under the new guidance, service cost will be included in the same line item(s) as other compensation costs arising from services rendered by employees during the period, while the other components will be recognized after income from operations. The guidance is effective for interim and fiscal years beginning after December 15, 2017. The guidance must be applied retrospectively; however, a practical expedient is available which permits an employer to use amounts previously disclosed in its pension and postretirement plans footnote for the prior comparative periods.
The Company adopted the new standard in the first quarter of 2018. In combination with the presentation change to net periodic pension cost and net periodic postretirement benefit cost, the Company allocated its costs associated with fringe benefits between operating expenses and selling, general and administrative expenses. Previously, costs related to fringe benefits were generally classified as selling, general and administrative expenses. The amounts in the previously issued financial statements have been reclassified to conform to the reclassified presentation. The effect of these changes to the Consolidated Statements of Operations for 2017 and 2016 is as follows:
(in thousands)As Previously Reported Adjustment Upon Adoption
Year Ended December 31, 2017     
Operating expenses$1,359,842
 $94,501
 $1,454,343
Selling, general and administrative expenses909,592
 (21,802) 887,790
Income from Operations209,102
 (72,699) 136,403
Non-operating pension and postretirement benefit income, net
 72,699
 72,699
Income Before Income Taxes182,789
 
 182,789
      
Year Ended December 31, 2016     
Operating expenses$1,180,945
 $89,085
 $1,270,030
Selling, general and administrative expenses904,517
 (8,420) 896,097
Income from Operations303,534
 (80,665) 222,869
Non-operating pension and postretirement benefit income, net
 80,665
 80,665
Income Before Income Taxes250,658
 
 250,658


In August 2018, the FASB issued new guidance that modified the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The new guidance, among other things, removed the following disclosure requirements: (i) the amounts in accumulated other comprehensive income expected to be recognized as components of net periodic benefit cost over the next fiscal year, and (ii) the effects of a one-percentage-point change in assumed health care cost trend rates on the (a) aggregate of the service and interest cost components of net periodic benefit costs, and (b) benefit obligation for postretirement health care benefits. The guidance also added the following disclosure requirements: (i) the weighted-average interest crediting rates for cash balance plans with promised interest crediting rates, and (ii) an explanation of the reasons for significant gains and losses related to changes in the benefit obligation for the period. This guidance is effective for fiscal years ending after December 15, 2020, with early adoption permitted. The Company adopted this guidance in the fourth quarter of 2018.Financial Statements.
Other new accounting pronouncements issued but not effective until after December 31, 2018,2021, are not expected to have a material impact on the Company’s Consolidated Financial Statements.
3.ACQUISITIONS AND DISPOSITIONS OF BUSINESSES
3.    ACQUISITIONS AND DISPOSITIONS OF BUSINESSES
Acquisitions. During 2021, the Company acquired 6 businesses: 2 in education, 2 in healthcare, 1 in automotive, and 1 in other businesses for $392.4 million in cash and contingent consideration and the assumption of floor plan payables. The assets and liabilities of the companies acquired were recorded at their estimated fair values at the date of the acquisition.
On June 14, 2021, the Company acquired all of the outstanding common shares of Leaf Group Ltd. for $308.6 million in cash and the assumption of $9.2 million in liabilities related to their previous stock compensation plan, which will be paid in the future. Leaf is a consumer internet company that builds creator-driven brands in lifestyle and home and art design categories. The acquisition is expected to provide benefits in the future by diversifying the Company’s business operations and providing operating synergies with other business units. The Company includes Leaf in other businesses.
Kaplan acquired certain assets of Projects in Knowledge, a continuing medical education provider for healthcare professionals, and another small business in November 2021. These acquisitions are expected to build upon Kaplan’s existing customer base in the medical and test preparation fields. Both business are included in Kaplan’s supplemental education division.
In December 2021, GHG acquired 2 businesses, a home health business in Florida and a 50.1% interest in Weiss, a physician practice specializing in allergies, asthma and immunology. The minority shareholder of Weiss has an option to put 10% of the shares to the Company annually starting in 2026 and may put all of the shares starting in 2033. The fair value of the redeemable noncontrolling interest in Weiss was $6.6 million at the acquisition
82


date, determined using an income approach. These acquisitions are expected to expand the market the healthcare division serves and are included in healthcare.
On December 28, 2021, the Company’s automotive subsidiary acquired a Ford automotive dealership for cash and the assumption of $16.2 million in floor plan payables (see Note 6). In connection with the acquisition, the automotive subsidiary of the Company borrowed $22.5 million to finance the acquisition (see Note 11). The dealership will be operated and managed by an entity affiliated with Christopher J. Ourisman, a member of the Ourisman Automotive Group family of dealerships. The acquisition expands the Company’s automotive business operations and is included in automotive.
During 2020, the Company acquired 3 businesses: 2 in education and 1 in other businesses for $96.8 million in cash and contingent consideration. The assets and liabilities of the companies acquired were recorded at their estimated fair values at the date of acquisition.
In the first three months of 2020, Kaplan acquired 2 small businesses; 1 in its supplemental education division and 1 in its international division.
In May 2020, the Company acquired an additional interest in Framebridge, Inc. for cash and contingent consideration that resulted in the Company obtaining control of the investee. Following the acquisition, the Company owns 93.4% of Framebridge. The Company previously accounted for Framebridge under the equity method, and included it in Investments in Affiliates on the Consolidated Balance Sheet (see Note 4). The contingent consideration is primarily based on Framebridge achieving revenue milestones within a specific time period. The fair value of the contingent consideration at the acquisition date was $50.6 million, determined using a Monte Carlo simulation. The fair value of the redeemable noncontrolling interest in Framebridge was $6.0 million as of the acquisition date, determined using a market approach. The minority shareholder has an option to put 20% of the minority shares annually starting in 2024. The acquisition is expected to provide benefits in the future by diversifying the Company’s business operations and is included in other businesses.
During 2019, the Company acquired 8 businesses: 1 in education, 3 in healthcare, 1 in manufacturing, 2 in automotive and 1 in other businesses for $211.8 million in cash and contingent consideration and the assumption of $25.8 million in floor plan payables. The assets and liabilities of the companies acquired were recorded at their estimated fair values at the date of acquisition.
On January 31, 2019, the Company acquired a 90%an interest in two auto dealerships.2 automotive dealerships for cash and the assumption of floor plan payables (see Note 6). In addition to a cash payment, aconnection with the acquisition, the automotive subsidiary of the Company borrowed $30 million to finance the acquisition and entered into an interest rate swap to fix the interest rate on the debt at 4.7% per annum. The Company is required to repayhas a 90% interest in the loan over a 10-year period by making monthly installment payments.automotive subsidiary. The Company also entered into a management services agreement with an entity toaffiliated with Christopher J. Ourisman, a member of the Ourisman Automotive Group family of dealerships. Mr. Ourisman and his team operate and manage the acquired dealerships. The Company paid a fee of $2.3 million for the year ended December 31, 2019 in connection with the management services provided under this agreement. In addition, the Company advanced $3.5 million to the minority shareholder, an entity controlled by Mr. Ourisman, at an interest rate of 6% per annum. The minority shareholder has the option to acquire up to an additional 10% interest in the automotive subsidiary. The acquisition is expected to provide benefits in the future by diversifying the Company’s business operations and will beis included in other businesses.automotive.
During 2018, the Company acquired eight businesses, five in its education division, one in its healthcare division and two in other businesses for $121.1 million in cash and contingent consideration. The assets and liabilities of the companies acquired were recorded at their estimated fair values at the date of acquisition.
In January and February 2018, Kaplan acquired the assets of i-Human Patients, Inc., a provider of cloud-based, interactive patient encounter simulations for medical and nursing professionals and educators, and another small business in test preparation and international, respectively. These acquisitions are expected to provide strategic benefits in the future.
In May 2018, KaplanJuly 2019, GHG acquired a 100% interest in Professional Publications, Inc. (PPI), an independent publisher of professional licensing exam review materials and engineering, surveying, architecture, and interior design licensure exam review, by purchasing all of its issued and outstanding shares. This acquisitiona small business which is expected to provide certain strategic benefits in the future. This acquisitionfuture and is included in Professional (U.S.).
healthcare. On July 12, 2018,11, 2019, Kaplan acquired a 100% interest in Heverald, the owner of the issuedESL Education, Europe’s largest language-travel agency and outstanding sharesAlpadia, a chain of the College for Financial Planning (CFFP), a provider of financial educationGerman and training to individuals pursuing the Certified Financial Planner certification, a Master of Science in Personal Financial Planning, or a Master of Science in Finance.French language schools and junior summer camps. The acquisition is expected to expandprovide synergies within Kaplan’s financial education product offeringsInternational English business and is included in Professional (U.S.).Kaplan’s international division.
On July 31, 2018, Dekko acquired 100%2019, the Company closed its acquisition of Clyde’s Restaurant Group. At the issueddate of acquisition, CRG owned and outstanding shares of Furnlite, Inc., a Fallston, NC-based manufacturer of poweroperated 13 restaurants and data solutions forentertainment venues in the hospitalityWashington, D.C. metropolitan area, including Old Ebbitt Grill and residential furniture industries. Dekko’s primary reasons forThe Hamilton. In connection with the acquisition, are to complement existing product offerings and to provide potential synergies across the businesses.Company entered into several leases with an entity affiliated with some of CRG’s senior managers. The acquisition is includedexpected to provide benefits in other businesses.
In August 2018, SocialCode acquired 100% of the membership interests of Marketplace Strategy (MPS), a Cleveland-based digital marketing agency that provides strategy consulting, optimization services, advertising managementfuture by diversifying the Company’s business operations and creative solutions on online marketplaces including Amazon. SocialCode’s primary reason for the acquisition is to expand its platform offerings. The acquisition is included in other businesses.
In September 2018, GHG2019, Joyce/Dayton Corp. acquired the assets of a small business and Kaplan acquired the test preparation and study guide assets of Barron’s Educational Series, a New York-based education publishing company.business. The acquisitions areacquisition is expected to complement the healthcarecurrent product offerings and test preparation services currently offered by GHG and Kaplan, respectively. GHG is included in manufacturing.
On December 1, 2019, GHG acquired 75% of the healthcare division.preferred shares of CSI Pharmacy Holding Company, LLC. In connection with the acquisition, CSI entered into an $11.25 million Term Loan to finance the acquisition. CSI is a specialty and home infusion pharmacy, which provides intravenous immunoglobulin therapies to patients. The Barron’s Educational Series acquisition is included in test preparation.
During 2017, the Company acquired six businesses, two in its education division, two in its television broadcasting division, one in its healthcare division and one in other businesses for $318.9 million in cash and contingent consideration,minority shareholders may put up to 50% of their preferred shares to GHG and the assumptionfirst put period begins in 2022. A second put period for another tranche of $59.1 millionpreferred shares begins in certain pension and postretirement obligations. The assets and liabilities of the companies acquired were recorded at their estimated fair values at the date of acquisition.


On January 17, 2017, the Company closed on its agreement with Nexstar Broadcasting Group, Inc. and Media General, Inc. to acquire the assets of WCWJ, a CW affiliate television station in Jacksonville, FL, and WSLS, an NBC affiliate television station in Roanoke, VA, for cash and the assumption of certain pension obligations. The acquisition of WCWJ and WSLS will complement the other stations that GMG operates. Both of these acquisitions are included in television broadcasting.
In February 2017, Kaplan acquired a 100% interest in Genesis Training Institute, a Dubai-based provider of professional development training in the United Arab Emirates, by purchasing all of its issued and outstanding shares. Additionally, Kaplan acquired a 100% interest in Red Marker Pty Ltd., an Australia-based regulatory technology company by purchasing all of its outstanding shares. These acquisitions are expected to provide certain strategic benefits in the future. Both of these acquisitions are included in Kaplan International.
In April 2017, the Company acquired 97.72% of the issued and outstanding shares of Hoover Treated Wood Products, Inc., a Thomson, GA-based supplier of pressure impregnated kiln-dried lumber and plywood products for fire retardant and preservative applications for $206.8 million, net of cash acquired.2024. The fair value of the redeemable
83


noncontrolling interest in HooverCSI was $3.7$1.7 million at the acquisition date, determined using a marketan income approach. The minority shareholders have an option to put some of their shares to the Company starting in 2019 and the remaining shares starting in 2021. The Company has an option to buy the shares of minority shareholders starting in 2027. This acquisition is consistent withexpected to expand the Company’s ongoing strategy of investing in companies with a history of profitability and strong management. Hoover is included in other businesses.
At the end of June 2017, GHG acquired a 100% interest in Hometown Home Health and Hospice, a Lapeer, MI-based healthcare services provider by purchasing all of its issued and outstanding shares. This acquisition expands GHG’s service area in Michigan. GHG is included in healthcare.
During 2016, the Company acquired five businesses, three businesses included in its education division and two businesses in other businesses for $258.0 million. The assets and liabilitiesproduct offerings of the companies acquired were recorded at their estimated fair values at the date of acquisition. In January 2016, Kaplan acquired a 100% interest in Mander Portman Woodward, a provider of high-quality, bespoke education to United Kingdom (U.K.) and international students in London, Cambridge and Birmingham, by purchasing all of its issued and outstanding shares. In February 2016, Kaplan acquired a 100% interest in Osborne Books, an educational publisher of learning resources for accounting qualifications in the U.K., by purchasing all of its issued and outstanding shares. The primary reason for these acquisitions was based on several strategic benefits expected to be realized in the future. Both of these acquisitions are included in Kaplan International.healthcare division.
In September 2016, Dekko acquired a 100% interest in Electri-Cable Assemblies, a Shelton, CT-based manufacturer of power, data and electrical solutions for the office furniture industry, by purchasing all of its issued and outstanding shares. Dekko’s primary reasons for the acquisition were to complement existing product offerings and provide opportunities for synergies across the businesses. This acquisition is included in other businesses.
Acquisition-related costs for acquisitions that closed during 2018, 20172021, 2020 and 20162019 were $1.5$3.0 million, $4.1$1.1 million and $1.5$3.0 million, respectively, and were expensed as incurred. The aggregate purchase price of these acquisitions was allocated as follows, based on acquisition date fair values to the following assets and liabilities (excluding measurement period adjustments recorded in subsequent years):
liabilities:
 Purchase Price AllocationPurchase Price Allocation
 Year Ended December 31Year Ended December 31
(in thousands) 2018 2017 2016(in thousands)202120202019
Accounts receivable $2,344
 $12,502
 $8,538
Accounts receivable$18,835 $745 $6,762 
Inventory 1,268
 25,253
 878
Inventory25,420 3,496 34,134 
Property, plant and equipment 1,518
 29,921
 3,940
Property, plant and equipment12,661 3,346 56,391 
Lease right-of-use assetsLease right-of-use assets26,333 6,580 98,505 
Goodwill 41,840
 143,149
 184,118
Goodwill205,003 73,951 84,669 
Indefinite-lived intangible assets 
 33,800
 53,110
Indefinite-lived intangible assets22,200 — 46,900 
Amortized intangible assets 78,427
 170,658
 28,267
Amortized intangible assets100,800 14,589 21,291 
Other assets 5,198
 1,880
 1,420
Other assets4,899 975 8,308 
Pension and other postretirement benefits liabilities 
 (59,116) 
Deferred income taxesDeferred income taxes42,850 15,958 (2,703)
Floor plan payablesFloor plan payables(16,198)— (25,755)
Other liabilities (7,678) (12,177) (21,892)Other liabilities(52,421)(14,917)(42,555)
Deferred income taxes (4,900) (37,289) (11,009)
Current and noncurrent lease liabilitiesCurrent and noncurrent lease liabilities(26,286)(6,593)(99,131)
Redeemable noncontrolling interest 
 (3,666) 
Redeemable noncontrolling interest(6,617)(6,005)(1,715)
Noncontrolling interestNoncontrolling interest — (1,154)
Aggregate purchase price, net of cash acquired $118,017
 $304,915
 $247,370
Aggregate purchase price, net of cash acquired$357,479 $92,125 $183,947 
The 2021 fair values recorded were based upon valuations.valuations and the estimates and assumptions used in such valuations are subject to change 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. The 2019 values above reflect a measurement period adjustment related to the lease right-of-use assets, current and noncurrent lease liabilities and the finalization of working capital. 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 $32.3$79.4 million, $11.0$3.2 million and $22.2$70.7 million of goodwill for income tax purposes for the acquisitions completed in 2018, 20172021, 2020 and 2016,2019, respectively.
The acquired companies were consolidated into the Company’s financial statements starting on their respective acquisition dates. The Company’s Consolidated Statements of Operations include aggregate revenue and operating loss of $28.8$132.4 million and $2.9$14.2 million, respectively, for the year ended December 31, 2018, respectively.2021. The following unaudited pro forma financial information presents the Company’s results as if the current year acquisitions had occurred at the beginning of 2017.2020. The unaudited pro forma information also includes the 20172020 acquisitions as if they occurred at the beginning of 20162019 and the 20162019 acquisitions as if they had occurred at the beginning of 2015:
2018:
Year Ended December 31Year Ended December 31
(in thousands)2018 2017 2016(in thousands)202120202019
Operating revenues$2,735,879
 $2,725,046
 $2,570,416
Operating revenues$3,513,689 $3,323,427 $3,089,712 
Net income273,688
 311,397
 175,021
Net income358,890 279,810 304,734 
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.
Kaplan University Transaction. On April 27, 2017, certain subsidiaries of Kaplan entered into a Contribution and Transfer Agreement to contribute the institutional assets and operations of Kaplan University to an Indiana non-profit, public-benefit corporation that is a subsidiary affiliated with Purdue University. The closing of the transactions contemplated by the Transfer Agreement occurred on March 22, 2018. At the same time, the parties entered into the TOSA pursuant to which Kaplan provides key non-academic operations support to the new university.
The new university operates largely online as a new Indiana public university affiliated with Purdue under the name Purdue University Global. As part of the transfer to Purdue University Global, KU transferred students, academic personnel, faculty and operations, property leases for KU’s campuses and learning centers, Kaplan-owned academic curricula and content related to KU courses. The operations support activities that Kaplan provides to Purdue University Global includes technology support, help-desk functions, human resources support for transferred faculty and employees, admissions support, financial aid administration, marketing and advertising, back-office business functions, certain test preparation and domestic and international student recruiting services.
The transfer of KU does not include any of the assets of the KU School of Professional and Continuing Education, which provides professional training and exam preparation for professional certifications and licensures, nor does it include the transfer of other Kaplan businesses such as Kaplan Test Preparation and Kaplan International. Those entities, programs and business lines remain part of Kaplan. Kaplan received nominal cash consideration upon transfer of the institutional assets.
Pursuant to the TOSA, Kaplan is not entitled to receive any reimbursement of costs incurred in providing support functions, or any fee, unless and until Purdue University Global has first covered all of its operating costs (subject to a cap). If Purdue University Global achieves cost efficiencies in its operations, then Purdue University Global may be entitled to an additional payment equal to 20% of such cost efficiencies (Purdue Efficiency Payment). In addition, during each of Purdue University Global’s first five years, prior to any payment to Kaplan, Purdue University Global is entitled to a priority payment of $10 million per year beyond costs. To the extent Purdue University Global’s revenue is insufficient to pay the $10 million per year priority payment, Kaplan is required to advance an amount to Purdue University Global to cover such insufficiency. At closing, Kaplan paid to Purdue University Global an advance in the amount of $20 million, representing, and in lieu of, priority payments for Purdue University Global’s fiscal years ending June 30, 2019 and June 30, 2020.
To the extent that there are sufficient revenues to pay the Purdue Efficiency Payment, Purdue University Global is reimbursed for its operating costs (subject to a cap) and the priority payment to Purdue University Global is paid. To the extent there is remaining revenue, Kaplan will then receive reimbursement for its operating costs (subject to a cap) of providing the support activities. If Kaplan achieves cost efficiencies in its operations, then Kaplan may be entitled to an additional payment equal to 20% of such cost efficiencies (Kaplan Efficiency Payment). If there are sufficient revenues, Kaplan may also receive a fee equal to 12.5% of Purdue University Global’s revenue. The fee will increase to 13% beginning with Purdue University Global’s fiscal year ending June 30, 2023 and continuing through Purdue University Global’s fiscal year ending June 30, 2027, and then the fee will return to 12.5% thereafter. Subject to certain limitations, a portion of the fee that is earned by Kaplan in one year may be carried over and instead paid to Kaplan in subsequent years.


After the first five years of the TOSA, Kaplan and Purdue University Global will be entitled to payments in a manner consistent with the structure described above, except that (i) Purdue University Global will no longer be entitled to a priority payment and (ii) to the extent that there are sufficient revenues after payment of the Kaplan Efficiency Payment (if any), Purdue University Global will be entitled to an annual payment equal to 10% of the remaining revenue after the Kaplan Efficiency Payment (if any) is paid and subject to certain other adjustments. The TOSA has a 30-year initial term, which will automatically renew for five-year periods unless terminated. After the sixth year, Purdue University Global has the right to terminate the agreement upon payment of a termination fee equal to 1.25 times Purdue University Global’s revenue for the preceding 12-month period, which payment would be made pursuant to a 10-year note, and at the election of Purdue University Global, it may receive for no additional consideration certain assets used by Kaplan to provide the support activities pursuant to the TOSA. At the end of the 30-year term, if Purdue University Global does not renew the TOSA, Purdue University Global will be obligated to make a final payment of 75% of its total revenue earned during the preceding 12-month period, which payment will be made pursuant to a 10-year note, and at the election of Purdue University Global, it may receive for no additional consideration certain assets used by Kaplan to provide the support activities pursuant to the TOSA.
Either party may terminate the TOSA at any time if Purdue University Global generates (i) $25 million in cash operating losses for three consecutive years or (ii) aggregate cash operating losses greater than $75 million at any point during the initial term. Operating loss is defined as the amount of revenue Purdue University Global generates minus the sum of (1) Purdue University Global’s and Kaplan’s respective costs in performing academic and support functions and (2) the $10 million priority payment to Purdue University Global in each of the first five years. Upon termination for any reason, Purdue University Global will retain the assets that Kaplan contributed pursuant to the Transfer Agreement. Each party also has certain termination rights in connection with a material default or material breach of the TOSA by the other party.
Pursuant to the U.S. Department of Education (ED) requirements, Purdue assumes responsibility for any liability arising from the operation of the institution. This assumption will not limit Kaplan’s obligation to indemnify Purdue for pre-closing liabilities under the Transfer Agreement. As a result of the transfer of KU, Kaplan will no longer own or operate KU or any other institution participating in student financial aid programs that have been created under Title IV of the U.S. Federal Higher Education Act of 1965, as amended. Consequently, Kaplan is no longer responsible for operating KU. However, pursuant to the TOSA, Kaplan will be performing functions that fall within the ED’s definition of a third-party servicer and will, therefore, assume certain regulatory responsibilities that require approval by the ED. The third-party servicer arrangement between Kaplan and Purdue University Global is also subject to information security requirements established by the Federal Trade Commission as well as all aspects of the Family Educational Rights and Privacy Act. As a third-party servicer, Kaplan may be required to undergo an annual compliance audit of its administration of the Title IV functions or services that it performs.
As a result of the KU Transaction, the Company recorded a pre-tax gain of $4.3 million in the first quarter of 2018. For financial reporting purposes, Kaplan may receive payment of additional consideration for the sale of the institutional assets as part of the fee to the extent there are sufficient revenues available after paying all amounts required by the TOSA. The Company recorded a $1.9 million contingent consideration gain related to the disposition in the year ended December 31, 2018, and did not adjust the contingent consideration in the fourth quarter of 2018.
The revenue and operating income related to the KU business disposed of is as follows:
  Year Ended December 31
(in thousands) 2018 2017 2016
Revenue $91,526
 $430,645
 $500,914
Operating income 213
 17,869
 39,498
Sale of Businesses. In February 2018, KaplanDecember 2020, the Company completed the sale of a small businessMegaphone which was included in Test Preparation.other businesses. In September 2018,November 2019, Kaplan AustraliaUK completed the sale of a small business which was included in Kaplan International. In February 2017, GHG completed the sale of Celtic Healthcare of Maryland. In the fourth quarter of 2017, Kaplan Australia completed the sale of a small business, which was included in Kaplan International. In January 2016, Kaplan completed the sale of Colloquy, which was included in Kaplan Corporate and Other. As a result of these sales, the Company reported gains (losses) in other non-operating income (see Note 15)16).
84


Other Transactions. In June 2018,March 2019, a Hoover minority shareholder put some shares to the Company, incurred $6.2 millionwhich had a redemption value of interest expense related$0.6 million. Following the redemption, the Company owned 98.01% of Hoover. In March 2021, Hoover’s minority shareholders put the remaining outstanding shares to the Company, which had a redemption value of $3.5 million. Following the redemption, the Company owns 100% of Hoover.
During 2019, the Company established GHC One as a vehicle to invest in a portfolio of healthcare businesses together with a group of senior managers of GHG. As a holder of preferred units, the Company is obligated to contribute 95% of the capital required for the acquisition of portfolio investments with the remaining 5% of the capital coming from the group of senior managers. The operating agreement of GHC One requires the dissolution of the entity on March 31, 2026, at which time the net assets will be distributed to its members. As a preferred unit holder, the Company will receive an amount up to its contributed capital plus a preferred annual return of 8% (guaranteed return) after the group of senior managers has received a redemption of their 5% interest in net assets (manager return). All distributions in excess of the manager and guaranteed return will be paid to common unit holders, which currently comprise the group of senior managers of GHG. The Company may convert its preferred units to common units at any time after which it will receive 80% of all distributions in excess of the manager return, with the remaining 20% of excess distributions going to the group of senior managers as holders of the other common units.
As of December 31, 2021, the Company holds a controlling financial interest in GHC One and therefore includes the assets, liabilities, results of operations and cash flows in its consolidated financial statements. GHC One acquired CSI and another small business during 2019, and Weiss during 2021. The Company accounts for the minority ownership of the group of senior managers as a mandatorily redeemable noncontrolling interest redemption settlement at GHG. The mandatorily redeemable noncontrolling interest was redeemed and paid in July 2018.(see Note 2).
In June 2016, Residential Healthcare (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

4.    INVESTMENTS

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.
In June 2016, the Company purchased the outstanding 20% redeemable noncontrolling interest in Residential. At that time, the Company recorded an increase to redeemable noncontrolling interest of $3.0 million, with a corresponding decrease to capital in excess of par value, to reflect the redemption value of the redeemable noncontrolling interest at $24.0 million. Following this transaction, Celtic Healthcare (Celtic) and Residential combined their business operations to form GHG. The redeemable noncontrolling interest shareholders in Celtic exchanged their 20% interest in Celtic for a 10% mandatorily redeemable noncontrolling interest in the combined entity, and the Company recorded a $4.1 million net increase to the mandatorily redeemable noncontrolling interest to reflect the estimated fair value of the mandatorily redeemable noncontrolling interest.
4.INVESTMENTS
Money Market Investments. As of December 31, 2018 and 2017,2021, the Company had no money market investments, of $75.5compared to $268.8 million and $217.6 million, respectively,at December 31, 2020, that are classified as cash and cash equivalents and restricted cash in the Company’s Consolidated Balance Sheets.
Investments in Marketable Equity Securities.Investments in marketable equity securities consist of the following:
As of December 31As of December 31
(in thousands)2018 2017(in thousands)20212020
Total cost$282,563
 $269,343
Total cost$273,201 $232,847 
Gross unrealized gains216,111
 266,972
Gross unrealized gains537,915 340,255 
Gross unrealized losses(2,284) 
Gross unrealized losses(1,119)— 
Total Fair Value$496,390
 $536,315
Total Fair Value$809,997 $573,102 
At December 31, 20182021 and 2017,2020, the Company owned 44,430 and 28,000 shares, respectively, in Markel Corporation (Markel) valued at $29.1$54.8 million and $31.9$28.9 million, respectively. The Co-Chief Executive Officer of Markel, Mr. Thomas S. Gayner, is a member of the Company’s Board of Directors. As of December 31, 2021, there was no marketable equity security holding that exceeded 5% of the Company’s total assets.
The Company purchased $42.7$48.0 million, $20.0 million and $7.5 million of marketable equity securities during 2018. There were no purchases during 2017. The Company settled on $48.3 million of marketable equity securities during 2016, of which $47.9 million was purchased during the year.2021, 2020 and 2019, respectively.
During 2018,2021, 2020 and 2019, the gross cumulative realized net gains from the sales of marketable equity securities were $37.3 million.$46.0 million, $23.0 million and $9.5 million, respectively. The total proceeds from such sales were $66.7 million. There were no sales of marketable equity securities during 2017. During 2016, proceeds from sales of marketable equity securities were $29.7$65.5 million, resulting in gross realized losses of $8.1$93.8 million and gross realized gains of $6.2 million.$19.3 million, respectively.
The net lossgain (loss) on marketable equity securities comprised the following:
Year ended December 31
(in thousands)202120202019
Gain on marketable equity securities, net$243,088 $60,787 

$98,668 
Less: Net (gains) losses in earnings from marketable equity securities sold and donated(17,830)13,382 (2,810)
Net unrealized gains in earnings from marketable equity securities still held at the end of the year$225,258 

$74,169 

$95,858 
 Year ended
(in thousands)December 31, 2018
Loss on marketable equity securities, net$(15,843)
Plus: Net losses in earnings from marketable equity securities sold4,271
Net unrealized losses in earnings from marketable equity securities still held at the end of the year$(11,572)
Investments in Affiliates. As of December 31, 2018,2021, the Company held an approximate 11%12% interest in Intersection Holdings, LLC (Intersection), and accounts for its investment under the equity method. The Company holds two of the ten seats of Intersection’s governing board, which allows the Company to exercise significant influence over Intersection. As of December 31, 2021, the Company also held investments in several other affiliates; GHG held a 40% interest in Residential Home Health Illinois, a 42.5% interest in Residential Hospice Illinois, a 40% interest in the joint venture formed between GHG and a Michigan hospital, and a 40% interest in the joint venture
85


formed between GHG and Allegheny Health Network (AHN). For the yearyears ended December 31, 20182021, 2020 and 2017,2019, the Company recorded $12.1$10.9 million, $9.6 million and $18.3$9.3 million, respectively, in revenue for services provided to the affiliates of GHG.
The Company had $52.5 million and $26.1 million in its investment account that represents cumulative undistributed income in its investments in affiliates as of December 31, 2021 and 2020, respectively.
In the third quarter of 2021, the Company recorded an impairment charge of $6.6 million on 1 of its investments in affiliates as a result of the challenging economic environment for this business following an announcement by the Chinese government to reform the education sector for private education companies. In the first quarter of 2020, the Company recorded impairment charges of $3.6 million on 2 of its investments in affiliates as a result of the challenging economic environment for these businesses, of which $2.7 million related to the Company’s investment in Framebridge. It is reasonably possible that further COVID-19 disruptions could result in additional impairment charges related to the Company’s investments in affiliates should the impact of COVID-19 not dissipate or have a worsening adverse impact on our affiliates in future periods. The Company records its share of the earnings or losses of its affiliates from their most recent available financial statements. In some instances, the reporting period of the affiliates’ financial statements lags the Company’s financial reporting period, but such lag is never more than three months. It is possible that the Company’s results of operations for the year ended December 31, 2021 does not capture the impact of the COVID-19 pandemic on the earnings or losses of the affiliates whose financial results are recorded on a lag basis.
In May 2020, the Company made an additional investment in Framebridge (see Note 3) that resulted in the Company obtaining control of the investee. The results of operations, cash flows, assets and liabilities of Framebridge are included in the consolidated financial statements of the Company from the date of the acquisition. Timothy J. O’Shaughnessy, President and Chief Executive Officer of Graham Holdings Company, was a personal investor in Framebridge and served as Chairman of the Board prior to the acquisition of the additional interest. The Company acquired Mr. O’Shaughnessy’s interest under the same terms as the other Framebridge investors.
In February 2019, the Company sold its interest in Gimlet Media. In connection with this sale, the Company recorded a gain of $29.0 million in the first quarter of 2019. The total proceeds from the sale were $33.5 million.
Additionally, Kaplan International Holdings Limited (KIHL) held a 45% interest in a joint venture formed with York University.University of York. KIHL agreed to loanloaned the joint venture £25£22 million, of which £16 million was advanced as of December 31, 2017. In the second quarter of 2018, KIHL advanced a final amount of £6 million in additional funding to the joint venture under this agreement, bringing the total amount advanced to £22 million. The loan is repayable over 25 years at an interest rate of 7% and the loan is guaranteed by the University of York. The loan is repayable by December 2041.
As a resultSummarized Financial Data of Nonconsolidated Affiliates. The Company's investments in affiliates consists of investments in private equity funds and other operating losses,entities that it does not control, but over which it exerts significant influence. The following tables present summarized financial data for the Company's nonconsolidated affiliates. The amounts included in the fourth quarter of 2017, the Company recorded a $2.8 million write-down on its investment in an affiliate. As a resulttables below present 100% of the challenging industry operating environmentbalance sheets and operating losses,the results of operations of such nonconsolidated affiliates accounted for under the equity method.
The Company’s ownership in private equity fund partnerships varies between approximately 4% and 10%; the Company’s related investment balance included in Investments in Affiliates was $72.8 million and $41.1 million as of December 31, 2021 and 2020, respectively.


fourth quarter of 2016, the Company recorded an $8.4 million write-down on its investment in HomeHero, a company that managed an online senior home care marketplace. In the third quarter of 2018, the Company recorded a $2.1 million gain in equity in earnings of affiliates following the receipt of a final distribution from HomeHero upon its liquidation. Also in the third quarter of 2018, the Company recorded a $5.8 million gain in equity in earnings of affiliates due to a funding event that increased the estimated liquidation valueThe summarized balance sheet data of the Company’s investment in oneprivate equity fund investments consists of its affiliates.the following:
In February 2019,
As of December 31
(in thousands)20212020
Investments in securities, at estimated fair value$2,039,368 $1,500,192 
Other currents assets28,590 24,111 
Total assets$2,067,958 $1,524,303 
Total liabilities4,790 7,488 
Total partners’ capital2,063,168 1,516,815 
Total liabilities and partners’ capital$2,067,958 $1,524,303 
The summarized operating data of the Company sold its interest in Gimlet Media;private equity fund investments was as follows:
Year ended December 31
(in thousands)202120202019
Net investment loss$(13,324)$(15,301)$(13,691)
Net realized gain on investments190,368 440 79,443 
Net change in unrealized appreciation on investments1,043,627 525,588 150,641 
Increase in net assets from operations$1,220,671 $510,727 $216,393 
86


The summarized balance sheet data of the Company will report a gain inoperating entity investments consists of the first quarterfollowing:
As of December 31
(in thousands)20212020
Current assets$203,274 $164,526 
Noncurrent assets569,505 566,053 
Total assets$772,779 $730,579 
Current liabilities219,220 428,735 
Noncurrent liabilities329,965 264,807 
Total liabilities$549,185 $693,542 
Noncontrolling interests$(80,604)$(103,829)
The summarized operating data of 2019.the operating entity investments was as follows:
Year ended December 31
(in thousands)202120202019
Net sales$358,928 $312,194 $438,168 
Gross profit146,312 11,217 103,510 
Net income (loss)135,241 (206,504)(125,146)
Net income (loss) attributable to the entity102,829 (148,394)(81,268)
Cost Method Investments. The Company held investments without readily determinable fair values in a number of equity securities that are accounted for as cost method investments, which are recorded at cost, less impairment, and adjusted for observable price changes for identical or similar investments of the same issuer. The carrying value of these investments was $30.6$48.9 million and $19.9$35.7 million as of December 31, 20182021 and 2017,2020, respectively. During 2018,the years ended December 31, 2021, 2020 and 2019, the Company recorded gains of $11.7$11.8 million, $4.2 million and $5.1 million, respectively, to those equity securities based on observable transactions andtransactions. For the year ended December 31, 2020, the Company recorded impairment losses of $2.7 million.$7.3 million to those securities.
5.    ACCOUNTS RECEIVABLE, ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts receivable consist of the following:
As of December 31As of December 31
(in thousands)2018 2017(in thousands)20212020
Receivables from contracts with customers, less doubtful accounts of $14,775 and $22,975$538,021
 $600,215
Receivables from contracts with customers, less estimated credit losses of $21,836 and $21,494Receivables from contracts with customers, less estimated credit losses of $21,836 and $21,494$589,582 $519,577 
Other receivables44,259
 20,104
Other receivables17,889 17,579 
$582,280
 $620,319
$607,471 $537,156 
The changes in allowance for doubtful accountsestimated credit losses was as follows:
(in thousands)
Balance at
Beginning of Period
 
Additions –
Charged to
Costs and
Expenses
 Deductions 
Balance
at
End of
Period
2018$22,975
 $10,209
 $(18,409) $14,775
2017$26,723
 $33,830
 $(37,578) $22,975
2016$27,854
 $29,718
 $(30,849) $26,723
(in thousands)Balance at
Beginning of Period
Additions –
Charged to
Costs and
Expenses
DeductionsBalance at
End of
Period
2021$21,494 $6,824 $(6,482)$21,836 
202014,276 10,667 (3,449)21,494 
201914,775 1,706 (2,205)14,276 
Accounts payable and accrued liabilities consist of the following:
As of December 31As of December 31
(in thousands)2018 2017(in thousands)20212020
Accounts payable and accrued liabilities$337,123
 $385,927
Accounts payableAccounts payable$126,985 $106,215 
Accrued compensation and related benefits149,455
 140,396
Accrued compensation and related benefits179,307 135,493 
Other accrued liabilitiesOther accrued liabilities277,337 278,528 
$486,578
 $526,323
$583,629 $520,236 
Cash overdrafts of $0.3$5.5 million and $6.0$2.1 million are included in accounts payable and accrued liabilities at December 31, 20182021 and 2017,2020, respectively.
87
6.INVENTORIES AND CONTRACTS IN PROGRESS


6.    INVENTORIES, CONTRACTS IN PROGRESS AND VEHICLE FLOOR PLAN PAYABLE
Inventories and contracts in progress consist of the following:
As of December 31
(in thousands)20212020
Raw materials$54,944 $45,382 
Work-in-process11,506 10,402 
Finished goods72,796 64,061 
Contracts in progress2,225 777 
 $141,471 $120,622 
The Company finances new and used vehicle inventory through standardized floor plan facilities with Truist Bank (Truist floor plan facility) and Ford Motor Credit Company (Ford floor plan facility). The Truist floor plan facility bore interest at variable rates that were based on LIBOR plus 1.15% per annum. On December 28, 2021, the Company entered into an amended agreement with Truist modifying the interest rate to Secured Overnight Financing Rate (SOFR) plus 1.19% per annum. The Ford floor plan facility bears interest at variable rates that are based on the prime rate, with a floor of 3.5%, plus 1.5% per annum. The weighted average interest rate for the floor plan facilities was 1.1%, 1.7% and 3.3% for the years ended December 31, 2021, 2020 and 2019, respectively. As of December 31, 2021, the aggregate capacity under the floor plan facilities was $70.9 million, of which $31.6 million had been utilized, and is included in accounts payable and accrued liabilities in the Consolidated Balance Sheet. Changes in the vehicle floor plan payable are reported as cash flows from financing activities in the Consolidated Statements of Cash Flows.
The floor plan facility is collateralized by vehicle inventory and other assets of the relevant dealership subsidiary, and contains a number of covenants, including, among others, covenants restricting the dealership subsidiary with respect to the creation of liens and changes in ownership, officers and key management personnel. The Company was in compliance with all of these restrictive covenants as of December 31, 2021.
The floor plan interest expense related to the vehicle floor plan arrangements is offset by amounts received from manufacturers in the form of floor plan assistance capitalized in inventory and recorded against cost of goods sold in the Consolidated Statements of Operations when the associated inventory is sold. For the years ended December 31, 2021, 2020 and 2019, the Company recognized a reduction in cost of goods sold of $2.7 million, $2.1 million and $1.8 million, respectively, related to manufacturer floor plan assistance.
7.    PROPERTY, PLANT AND EQUIPMENT
 As of December 31
(in thousands)2018 2017
Raw materials$37,248
 $30,429
Work-in-process11,633
 10,258
Finished goods17,861
 18,851
Contracts in progress2,735
 1,074
 $69,477
 $60,612


7.PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
As of December 31As of December 31
(in thousands)2018 2017(in thousands)20212020
Land$15,965
 $16,190
Land$73,651 $19,394 
Buildings108,683
 107,932
Buildings211,758 176,653 
Machinery, equipment and fixtures382,064
 387,914
Machinery, equipment and fixtures419,778 398,334 
Leasehold improvements206,170
 215,445
Leasehold improvements215,640 229,512 
Construction in progress68,064
 16,649
Construction in progress19,517 25,301 
780,946
 744,130
940,344 849,194 
Less accumulated depreciation(487,861) (484,772)Less accumulated depreciation(472,218)(470,908)
$293,085
 $259,358
$468,126 $378,286 
Depreciation expense was $56.7$71.4 million, $62.5$74.3 million, and $64.6$59.3 million in 2018, 20172021, 2020 and 2016,2019, respectively.
The Company capitalized $0.8 million, $0.3 million, and$0.4$2.1 million of interest related to the construction of buildings in 2018, 2017and2016, respectively.2019.
In the third quarterThe Company recorded property, plant and equipment impairment charges of 2018, GHG recorded an impairment charge of $0.2 million. In the second quarter of 2017, as a result of a challenging operating environment, Forney recorded a $0.6$2.4 million, impairment charge. In the third quarter of 2017, GHG recorded an impairment charge of $0.4 million.$2.3 million and $0.3 million in 2021, 2020 and 2019, respectively. The Company estimated the fair value of the property, plant and equipment using aincome and market approaches.
88


8.    LEASES
The components of lease expense were as follows:
Year ended December 31
(in thousands)202120202019
Operating lease cost$96,078 $113,669 $104,007 
Short-term and month-to-month lease cost17,724 21,862 19,267 
Variable lease cost20,889 18,718 20,582 
Sublease income(16,918)(18,508)(20,108)
Total net lease cost$117,773 $135,741 $123,748 
The Company recorded impairment charges of $3.9 million, $11.4 million and $1.1 million in 2021, 2020 and 2019, respectively. The Company estimated the fair value of the right-of-use assets using an income approach. Forney
In connection with the sale of the KHE Campuses (KHEC) business, the Company is includedthe guarantor of several leases for which it has established ROU assets and lease liabilities. Any net lease cost or sublease income related to these leases is recorded in other businesses.non-operating income. The total net lease cost related to these leases was $0.1 million, $0.8 million and $0.8 million for 2021, 2020 and 2019, respectively.
Supplemental information related to leases was as follows:
8.GOODWILL AND OTHER INTANGIBLE ASSETS
Year ended December 31
(in thousands)202120202019
Cash Flow Information:
Operating cash flows from operating leases (payments)$105,164 $113,664 $112,671 
Right-of-use assets obtained in exchange for new operating lease liabilities (noncash)59,409 27,031 236,714 
As of December 31
20212020
Balance Sheet Information:
Lease right-of-use assets$437,969 $462,560 
Current lease liabilities$77,655 $86,797 
Noncurrent lease liabilities405,200 428,849 
Total lease liabilities$482,855 $515,646 
Weighted average remaining lease term (years)10.69.9
Weighted average discount rate4.6 %4.4 %
At December 31, 2021, maturities of lease liabilities were as follows:
(in thousands)December 31, 2021
2022$97,501 
202379,854 
202464,030 
202550,392 
202645,897 
Thereafter296,514 
Total payments634,188 
Less: Imputed interest(151,333)
Total$482,855 
As of December 31, 2021, the Company has entered into operating leases, including educational and other facilities, that have not yet commenced that have minimum lease payments of $6.6 million. These operating leases will commence in fiscal year 2022 with lease terms of two to 11 years.
89


9.    GOODWILL AND OTHER INTANGIBLE ASSETS
The Company changed the presentation of its segments in the third quarter of 2021 into the following 7 reportable segments: Kaplan International, Higher Education, Supplemental Education, Television Broadcasting, Manufacturing, Healthcare and Automotive (see Note 19).
In the third quarter of 2018, Healthcare recorded an intangible asset impairment charge of $7.9 million following the decision to discontinue the use of the Celtic trade name. The fair value of the intangible asset was estimated using an income approach.
In the second quarter of 2017,2021, as a result of a challenging operating environment, the Forney reporting unit recorded a goodwillemergence of the COVID-19 Delta variant and intangible asset impairment charge of $8.6 million. Thecontinued weak product demand in the commercial office electrical products and hospitality sectors caused by the COVID-19 pandemic, the Company performed an interim review of the goodwill and other long-lived assetsindefinite-lived intangibles of the Dekko reporting unit. As a result of the impairment review, the Company recorded a $26.7 million goodwill impairment charge. The Company estimated the fair value of the reporting unit by utilizing a discounted cash flow model to estimate the fair value.model. The carrying value of the reporting unit exceeded the estimated fair value, resulting in a goodwill impairment charge for the amount by which the carrying value exceeded the estimated fair value after taking into account the effect of deferred income taxes. Dekko is included in manufacturing.
In the first quarter of 2020, as a result of the uncertainty and challenging operating environment created by the COVID-19 pandemic, the Company performed an interim review of the goodwill, indefinite-lived intangibles and other long-lived assets of the CRG and automotive dealership reporting unit’sunits and asset groups. As a result of the impairment reviews, the Company recorded a $9.7 million goodwill and indefinite-lived intangible asset impairment charge at CRG and a $6.7 million indefinite-lived intangible asset impairment charge at the auto dealerships. The Company estimated the fair value of the reporting units and indefinite-lived intangible assets by utilizing a discounted cash flow model. The carrying value of the CRG reporting unit and the indefinite-lived intangible assets exceeded the estimated fair value, resulting in a goodwill and indefinite-lived intangible asset impairment charge for the amount by which the carrying value exceeded the estimated fair value. ForneyCRG is included in other businesses.businesses and the automotive dealerships are included in automotive.
Additional COVID-19 disruptions could result in future adverse changes in projections for future operating results or other key assumptions, such as projected revenue, profit margin, capital expenditures or cash flows associated with fair value estimates and could lead to additional future impairments, which could be material.
In the fourth quarter of 2016, as a result of the challenging industry operating environment and operating losses, one of the businesses in the other businesses segment2019, Television Broadcasting recorded a goodwillan intangible asset impairment charge of $1.6 million.$7.8 million related to FCC licenses at 2 of its stations, due to a decline in local market conditions. The fair value of the intangible asset was estimated using an income approach.
Amortization of intangible assets for the years ended December 31, 2018, 20172021, 2020 and 2016,2019, was $47.4$57.9 million, $41.2$56.8 million and $26.7$53.2 million, respectively. Amortization of intangible assets is estimated to be approximately $52 million in 2019, $49 million in 2020, $43 million in 2021, $37$59 million in 2022, $29$51 million in 2023, $39 million in 2024, $31 million in 2025, $26 million in 2026 and $53$41 million thereafter.

90



The changes in the carrying amount of goodwill, by segment, were as follows:
(in thousands)Education 
Television
Broadcasting
 Healthcare 
Other
Businesses
 Total(in thousands)EducationTelevision
Broadcasting
ManufacturingHealthcareAutomotiveOther
Businesses
Total
As of December 31, 2016         
As of December 31, 2019As of December 31, 2019    
Goodwill$1,111,003
 $168,345
 $59,640
 $142,501
 $1,481,489
Goodwill$1,140,958 $190,815 $234,993 $98,421 $39,121 $30,423 $1,734,731 
Accumulated impairment losses(350,850) 
 
 (7,685) (358,535)Accumulated impairment losses(331,151)— (7,616)— — (7,685)(346,452)
760,153
 168,345
 59,640
 134,816
 1,122,954
809,807 190,815 227,377 98,421 39,121 22,738 1,388,279 
Measurement period adjustmentMeasurement period adjustment154 — — — — — 154 
Acquisitions19,174
 22,470
 10,181
 91,324
 143,149
Acquisitions13,022 — — — — 60,928 73,950 
Impairment
 
 
 (7,616) (7,616)Impairment— — — — — (6,878)(6,878)
Dispositions
 
 (412) 
 (412)
Foreign currency exchange rate changes41,635
 
 
 
 41,635
Foreign currency exchange rate changes29,245 — — — — — 29,245 
As of December 31, 2017 
  
    
  
As of December 31, 2020As of December 31, 2020    
Goodwill1,171,812
 190,815
 69,409
 233,825
 1,665,861
Goodwill1,183,379 190,815 234,993 98,421 39,121 91,351 1,838,080 
Accumulated impairment losses(350,850) 
 
 (15,301) (366,151)Accumulated impairment losses(331,151)— (7,616)— — (14,563)(353,330)
820,962
 190,815
 69,409
 218,524
 1,299,710
852,228 190,815 227,377 98,421 39,121 76,788 1,484,750 
Acquisitions20,424
 
 217
 21,199
 41,840
Acquisitions16,342   19,908 6,705 162,048 205,003 
Dispositions(11,191) 
 
 
 (11,191)
ImpairmentImpairment  (26,686)   (26,686)
Foreign currency exchange rate changes(32,647) 
 
 
 (32,647)Foreign currency exchange rate changes(13,485)     (13,485)
As of December 31, 2018         
As of December 31, 2021As of December 31, 2021
Goodwill1,128,699
 190,815
 69,626
 255,024
 1,644,164
Goodwill1,186,236 190,815 234,993 118,329 45,826 253,399 2,029,598 
Accumulated impairment losses(331,151) 
 
 (15,301) (346,452)Accumulated impairment losses(331,151) (34,302)  (14,563)(380,016)
$797,548
 $190,815
 $69,626
 $239,723
 $1,297,712
$855,085 $190,815 $200,691 $118,329 $45,826 $238,836 $1,649,582 
The changes in carrying amount of goodwill at the Company’s education division were as follows:
(in thousands)Kaplan
International
Higher
Education
Supplemental EducationTotal
As of December 31, 2019   
Goodwill$595,604 $174,564 $370,790 $1,140,958 
Accumulated impairment losses— (111,324)(219,827)(331,151)
 595,604 63,240 150,963 809,807 
Measurement period adjustment154 — — 154 
Acquisitions9,788 — 3,234 13,022 
Foreign currency exchange rate changes29,203 — 42 29,245 
As of December 31, 2020
Goodwill634,749 174,564 374,066 1,183,379 
Accumulated impairment losses— (111,324)(219,827)(331,151)
 634,749 63,240 154,239 852,228 
Acquisitions  16,342 16,342 
Foreign currency exchange rate changes(13,481) (4)(13,485)
As of December 31, 2021  
Goodwill621,268 174,564 390,404 1,186,236 
Accumulated impairment losses (111,324)(219,827)(331,151)
 $621,268 $63,240 $170,577 $855,085 
91


(in thousands)
Kaplan
International
 
Higher
Education
 
Test
Preparation
 Professional (U.S.) Total
As of December 31, 2016         
Goodwill$555,185
 $205,494
 $166,098
 $184,226
 $1,111,003
Accumulated impairment losses
 (131,023) (102,259) (117,568) (350,850)
 555,185
 74,471
 63,839
 66,658
 760,153
Acquisitions19,174
 
 
 
 19,174
Foreign currency exchange rate changes41,502
 
 
 133
 41,635
As of December 31, 2017         
Goodwill615,861
 205,494
 166,098
 184,359
 1,171,812
Accumulated impairment losses
 (131,023) (102,259) (117,568) (350,850)
 615,861
 74,471
 63,839
 66,791
 820,962
Acquisitions62
 
 822
 19,540
 20,424
Dispositions
 (11,191) 
 
 (11,191)
Foreign currency exchange rate changes(32,499) (40) 
 (108) (32,647)
As of December 31, 2018 
  
  
    
Goodwill583,424
 174,564
 166,920
 203,791
 1,128,699
Accumulated impairment losses
 (111,324) (102,259) (117,568) (331,151)
 $583,424
 $63,240
 $64,661
 $86,223
 $797,548


Other intangible assets consist of the following:
  As of December 31, 2018 As of December 31, 2017  As of December 31, 2021As of December 31, 2020
(in thousands)
Useful
Life
Range
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
 Gross
Carrying
Amount
 Accumulated
Amortization
 Net
Carrying
Amount
(in thousands)Useful
Life
Range
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Amortized Intangible Assets             Amortized Intangible Assets      
Student and customer relationships2–10 years (1) $282,761
 $114,429
 $168,332
 $260,464
 $83,690
 $176,774
Student and customer relationships2–10 years$300,027 $206,714 $93,313 $294,077 $178,075 $116,002 
Trade names and trademarks2–10 years 87,285
 39,825
 47,460
 50,286
 25,596
 24,690
Trade names and trademarks2–15 years (1)158,365 68,113 90,252 109,809 54,766 55,043 
Network affiliation agreements10 years 17,400
 3,408
 13,992
 17,400
 1,668
 15,732
Network affiliation agreements10 years17,400 8,628 8,772 17,400 6,888 10,512 
Databases and technology3–6 years 27,041
 8,471
 18,570
 19,563
 5,008
 14,555
Databases and technology3–6 years36,585 26,464 10,121 34,864 19,924 14,940 
Noncompete agreements2–5 years 1,088
 838
 250
 930
 467
 463
Noncompete agreements2–5 years1,000 991 9 1,000 937 63 
Other1–8 years 24,530
 9,873
 14,657
 13,430
 7,668
 5,762
Other1–8 years68,500 23,847 44,653 24,800 16,714 8,086 
  $440,105
 $176,844
 $263,261
 $362,073
 $124,097
 $237,976
 $581,877 $334,757 $247,120 $481,950 $277,304 $204,646 
Indefinite-Lived Intangible Assets     
  
    
  
Indefinite-Lived Intangible Assets      
Trade names and trademarks  $80,102
  
  
 $82,745
    Trade names and trademarks $86,972   $87,429 
Franchise agreementsFranchise agreements 44,058   21,858 
FCC licenses 18,800
     18,800
    FCC licenses11,000 11,000 
Licensure and accreditation  150
  
  
 650
  
  
Licensure and accreditation 150   150   
  $99,052
  
  
 $102,195
  
  
 $142,180   $120,437   
____________
(1)As of December 31, 2017,2020, the studenttrade names and customer relationships’ minimumtrademarks’ maximum useful life was 1 year.10 years.
9.INCOME TAXES
10.    INCOME TAXES
Income before income taxes consists of the following:
Year Ended December 31Year Ended December 31
(in thousands)2018 2017 2016(in thousands)202120202019
U.S.$257,312
 $134,276
 $227,457
U.S.$421,420 $403,295 $390,144 
Non-U.S.66,196
 48,513
 23,201
Non-U.S.28,207 3,973 36,335 
$323,508
 $182,789
 $250,658
$449,627 $407,268 $426,479 
The provision for (benefit from) income taxes consists of the following:
(in thousands)CurrentDeferredTotal
Year Ended December 31, 2021   
U.S. Federal$20,806 $64,356 $85,162 
State and Local4,354 (435)3,919 
Non-U.S.6,094 1,125 7,219 
$31,254 $65,046 $96,300 
Year Ended December 31, 2020  
U.S. Federal$77,882 $6,669 $84,551 
State and Local8,083 4,954 13,037 
Non-U.S.6,958 2,754 9,712 
$92,923 $14,377 $107,300 
Year Ended December 31, 2019  
U.S. Federal$16,500 $63,838 $80,338 
State and Local2,949 6,630 9,579 
Non-U.S.9,400 (717)8,683 
$28,849 $69,751 $98,600 
92


(in thousands)Current Deferred Total
Year Ended December 31, 2018     
U.S. Federal$46,059
 $16,718
 $62,777
State and Local2,240
 (23,809) (21,569)
Non-U.S.10,924
 (32) 10,892
 $59,223
 $(7,123) $52,100
Year Ended December 31, 2017     
U.S. Federal$10,743
 $(153,217) $(142,474)
State and Local5,930
 3,306
 9,236
Non-U.S.10,079
 3,459
 13,538
 $26,752
 $(146,452) $(119,700)
Year Ended December 31, 2016     
U.S. Federal$56,342
 $33,959
 $90,301
State and Local6,325
 (5,164) 1,161
Non-U.S.8,463
 (18,725) (10,262)
 $71,130
 $10,070
 $81,200


The provision for income taxes differs from the amount of income tax determined by applying the U.S. Federal statutory rate of 21% in 2018, and 35% in 2017 and 2016, to the income before taxes as a result of the following:
Year Ended December 31Year Ended December 31
(in thousands)2018 2017 2016(in thousands)202120202019
U.S. Federal taxes at statutory rate (see above)$67,937
 $63,976
 $87,731
U.S. Federal taxes at statutory rate (see above)$94,422 $85,526 $89,561 
State and local taxes, net of U.S. Federal tax(1,279) 6,949
 (2,965)State and local taxes, net of U.S. Federal tax2,238 15,366 (4,064)
Valuation allowances against state tax benefits, net of U.S. Federal tax(15,767) (946) 3,196
Valuation allowances against state tax benefits, net of U.S. Federal tax859 (5,067)11,632 
Stock-based compensation(1,731) (6,023) 
Stock-based compensation(24)2,048 (1,743)
Valuation allowances against other non-U.S. income tax benefits1,322
 (1,935) (12,688)Valuation allowances against other non-U.S. income tax benefits4,042 2,445 1,202 
Goodwill impairments and dispositions
 
 (5,631)
U.S. Federal Manufacturing Deduction tax benefits
 (1,329) (6,012)
Write-off of deferred taxes related to intercompany loans
 
 10,965
Deferred tax impact of U.S. Federal tax rate reduction to 21%, net of state tax impact
 (153,336) 
Deferred tax benefit on unremitted non-U.S. subsidiary earnings related to the Tax Act
 (28,324) 
Other, net1,618
 1,268
 6,604
Other, net(5,237)6,982 2,012 
Provision for (Benefit from) Income Taxes$52,100
 $(119,700) $81,200
Provision for Income TaxesProvision for Income Taxes$96,300 $107,300 $98,600 
The Tax Cuts and Jobs Act (the Tax Act)Company’s effective tax rate for 2021 was enacted on December 22, 2017, making significant changes to the Internal Revenue Code. In accordance with SEC Staff Accounting Bulletin No. 118 (SAB 118) the Company finalized its analysis of the Tax Act and no material adjustments were madefavorably impacted by a $17.2 million deferred tax adjustment arising from a change in the Consolidated Financial Statements for the year ended December 31, 2018 with respect to provisional amounts previously recorded.
Changes as a result of the Tax Act include, but are not limited to, a reduction in the federal corporateestimated deferred state income tax rate from 35%attributable to 21% effective January 1, 2018; the imposition of a one-time transition tax on historic earnings of certain non-U.S. subsidiaries that were previously tax deferred; and the imposition of new U.S. taxes on certain non-U.S. earnings. The U.S. Federal corporate income tax rate change resulted in a one-time, non-cash benefit and corresponding reduction of the Company’s U.S. Federal deferred tax liabilities, net of the state tax impact, of $153.3 million, which was recordedapportionment formula used in the fourth quarter of 2017, the period in which the legislation was enacted. The Company did not incur, and did not record, any liability with respect to the one-time U.S. transition tax imposed by the Tax Act on unremitted non-U.S. subsidiary earnings. The Company estimates that unremitted non-U.S. subsidiary earnings, when distributed, will not be subject to tax except to the extent non-U.S. withholding taxes are imposed. Accordingly, the Company recorded net deferred tax benefits and a corresponding reduction in deferred tax liabilities of $28.3 million in the fourth quarter of 2017, with respect to unremitted non-U.S. subsidiary earnings. Approximately $1.7 millioncalculation of deferred tax liabilities remained recorded on the books at December 31, 2018, with respect to future non-U.S. withholding taxes the Company estimated may be imposed on future cash distributions.
During 2016, certain intercompany loans were capitalized and other intercompany loans were designated as long-term investments, resulting in the write-off of $11.0 million in U.S. deferred tax assets. Also, the Company benefited from a favorable $5.6 million out of period deferred tax adjustment related to the KHE goodwill impairment recordedCompany’s pension and other postretirement plans. This benefit is included in the third quarteroverall state tax provision of 2015.$2.2 million reflected above.


Deferred income taxes consist of the following:
As of December 31As of December 31
(in thousands)2018 2017(in thousands)20212020
Employee benefit obligations$68,392
 $84,148
Employee benefit obligations$64,258 $72,787 
Accounts receivable4,449
 5,481
Accounts receivable3,554 3,795 
State income tax loss carryforwards34,107
 35,434
State income tax loss carryforwards63,050 53,499 
State capital loss carryforwards1,093
 
State capital loss carryforwards107 289 
State income tax credit carryforwardsState income tax credit carryforwards511 281 
U.S. Federal income tax loss carryforwards2,100
 2,857
U.S. Federal income tax loss carryforwards69,509 18,272 
U.S. Federal foreign income tax credit carryforwards987
 2,522
U.S. Federal foreign income tax credit carryforwards970 992 
Non-U.S. income tax loss carryforwards15,868
 18,797
Non-U.S. income tax loss carryforwards18,877 15,802 
Non-U.S. capital loss carryforwards3,609
 2,336
Non-U.S. capital loss carryforwards3,707 3,925 
LeasesLeases63,715 74,240 
Other14,657
 26,546
Other6,396 6,214 
Deferred Tax Assets145,262
 178,121
Deferred Tax Assets294,654 250,096 
Valuation allowances(33,120) (48,742)Valuation allowances(57,603)(47,217)
Deferred Tax Assets, Net$112,142
 $129,379
Deferred Tax Assets, Net237,051 202,879 
Prepaid pension cost269,412
 283,604
Prepaid pension cost594,372 457,644 
Unrealized gain on available-for-sale securities51,242
 70,827
Unrealized gain on marketable equity securitiesUnrealized gain on marketable equity securities138,868 88,371 
Goodwill and other intangible assets88,798
 109,428
Goodwill and other intangible assets103,497 90,921 
Property, plant and equipment9,997
 11,248
Property, plant and equipment15,451 15,807 
LeasesLeases51,668 61,148 
Non-U.S. withholding tax1,726
 1,606
Non-U.S. withholding tax2,001 1,866 
Deferred Tax Liabilities$421,175
 $476,713
Deferred Tax Liabilities905,857 715,757 
Deferred Income Tax Liabilities, Net$309,033
 $347,334
Deferred Income Tax Liabilities, Net$668,806 $512,878 
The Company has $698.9$1,026.1 million of state income tax net operating loss carryforwards available to offset future state taxable income. During 2021, the Company recorded $115.4 million of state income tax loss carryforwards as a result of the Leaf acquisition. State income tax loss carryforwards, if unutilized, will start to expire approximately as follows:
(in millions) (in millions) 
2019$1.8
202015.5
202117.1
20220.3
2022$1.9 
20235.0
20237.5 
2024 and after659.2
202420247.5 
2025202518.3 
2026202614.5 
2027 and after2027 and after976.4 
Total$698.9
Total$1,026.1 
The Company has recorded at December 31, 2018, $34.12021, $63.1 million in deferred state income tax assets, net of U.S. Federal income tax, with respect to these state income tax loss carryforwards. The Company has established $17.9 $35.4
93


million in valuation allowances against these deferred state income tax assets, since the Company has determined that it is more likely than not that some of these state tax losses may not be fully utilized in the future to reduce state taxable income. During 2018, the Company’s education division released valuation allowances recorded against state deferred tax assets, net of U.S. Federal tax, of approximately $20.0 million because the education division recently generated positive operating results that support the realization of these deferred tax assets.
The Company has $9.9$331.0 million of U.S. Federal income tax loss carryforwards obtained as a result of prior stock acquisitions. During 2021, the Company recorded $262.5 million of U.S. Federal income tax loss carryforwards as a result of the Leaf acquisition. U.S. Federal income tax loss carryforwards are expected to be fully utilized as follows:
(in millions) (in millions) 
2019$3.3
20203.3
20211.1
20220.9
2022$27.9 
20230.4
202327.4 
2024 and after0.9
2024202427.4 
2025202524.4 
2026202613.6 
2027 and after2027 and after210.3 
Total$9.9
Total$331.0 
The Company has established at December 31, 2018, $2.12021, $69.5 million in U.S. Federal deferred tax assets with respect to these U.S. Federal income tax loss carryforwards.
For U.S. Federal income tax purposes, the Company has established U.S. Federal deferred tax assets with respect to $1.0 million of foreign tax credits available to be credited against future U.S. Federal income tax liabilities. If unutilized, these foreign tax creditsliabilities that will start to expire in 2023.2023 if unutilized. The Company has established at December 31, 2018, $1.0 million of U.S. Federal deferred tax assets with respect


to these U.S. Federal foreign tax credit carryforwards, and the Company has recorded a full valuation allowance against these deferred tax assets since the Company determined that it is more likely than not these foreign tax credit carryforwards may not be utilized in the future to reduce U.S. Federal income taxes.
The Company has $58.1$87.1 million of non-U.S. income tax loss carryforwards as a result of operating losses and carryforwards that were obtained in part through prior stock acquisitions that are available to offset future non-U.S. taxable income and has recorded, with respect to these losses, $15.9$18.9 million in non-U.S. deferred income tax assets. The Company has established $6.1$14.9 million in valuation allowances against the deferred tax assets for the portion of non-U.S. tax losses that may not be utilized to reduce future non-U.S. taxable income. The $58.1$87.1 million of non-U.S. income tax loss carryforwards consist of $46.8$44.2 million in losses that may be carried forward indefinitely; $8.4$12.2 million of losses that, if unutilized, will expire in varying amounts through 2023;2026; and $2.9$30.7 million of losses that, if unutilized, will start to expire after 2023.2026.
The Company has $12.0$12.4 million of non-U.S. capital loss carryforwards that may be carried forward indefinitely and are available to offset future non-U.S. capital gains. The Company recorded a $3.6$3.7 million non-U.S. deferred income tax asset for these non-U.S. capital loss carryforwards and has established a full valuation allowance against this non-U.S. deferred tax asset since the Company has determined that it is more likely than not that the capital loss carryforwards may not be utilized to reduce taxable income in the future.
Deferred tax valuation allowances and changes in deferred tax valuation allowances were as follows:
(in thousands)Balance at Beginning of Period Tax Expense and Revaluation Deductions 
Balance at End of
Period
Year ended       
December 31, 2018$48,742
 $4,413
 $(20,035) $33,120
December 31, 2017$41,319
 $7,423
 $
 $48,742
December 31, 2016$69,545
 $4,709
 $(32,935) $41,319
(in thousands)Balance at Beginning of PeriodTax Expense and RevaluationDeductionsBalance at End of
Period
Year ended    
December 31, 2021$47,217 $13,915 $(3,529)$57,603 
December 31, 202046,243 7,303 (6,329)47,217 
December 31, 201933,120 14,512 (1,389)46,243 
The Company has established $22.2$37.5 million in valuation allowances against deferred state tax assets recognized, net of U.S. Federal tax. As stated above, approximately $17.9$35.4 million of the valuation allowances, net of U.S. Federal income tax, relate to state income tax loss carryforwards. TheIn most instances, the Company has established valuation allowances against deferred state income tax assets without considering potentially offsetting deferred tax liabilities established with respect to prepaid pension cost and goodwill. Prepaid pension cost and goodwill have not been considered a source of future taxable income for realizing those deferred state deferred tax assets recognized since these temporary differences are not likely to reverse in the foreseeable future, and at this time no materialfuture. However, certain deferred state tax assets have an indefinite life. As a result, the Company has considered deferred tax liabilities for prepaid pension cost and goodwill as a source of future taxable income for realizing those deferred state tax assets recorded are impacted by the newwith indefinite net operating loss carryforward rules.lives. The valuation allowances established against deferred state income tax assets may increase or decrease within the next 12 months, based on operating results or the market value of investment holdings. In 2021, the Company released $1.8 million in valuation allowances against deferred state income tax assets at the healthcare division as the healthcare division generated positive operating results that support the realization of these deferred
94


tax assets, net of the federal benefit. The Company will be monitoringmonitor future results on a quarterly basis to determine whether the valuation allowances provided against deferred state tax assets should be increased or decreased as future circumstances warrant. The Company’s education division released valuation allowances against state deferred tax assets of $20.0 million during 2018, as the education division recently generated positive operating results that support the realization of these deferred tax assets.
The Company has established $9.9$19.1 million in valuation allowances against non-U.S. deferred tax assets, and, as stated above, $6.1$14.9 million of the non-U.S. valuation allowances relate to non-U.S. income tax loss carryforwards and $3.6$3.7 million relate to non-U.S. capital loss carryforwards. Valuation allowances established against non-U.S. deferred tax assets are recorded at the education division and other businesses. These non-U.S. valuation allowances may increase or decrease within the next 12 months, based on operating results. As a result, the Company is unable to estimate the potential tax impact, given the uncertain operating environment. The Company will be monitoringmonitor future education division and other businesses’ operating results and projected future operating results on a quarterly basis to determine whether the valuation allowances provided against non-U.S. deferred tax assets should be increased or decreased as future circumstances warrant. In
The Company estimates that unremitted non-U.S. subsidiary earnings, when distributed, will not be subject to tax except to the third quarter of 2016, the Company released $19.3extent non-U.S. withholding taxes are imposed. Approximately $2.0 million of valuation allowance previouslydeferred tax liabilities remain recorded on its operations in Australia.
The Tax Act generally provides a 100% dividends received deduction for distributions from non-U.S. subsidiaries after December 31, 2017. The Tax Act establishes a new regime, the Global Intangible Low Taxed Income (GILTI) tax, that may currently subject to U.S. tax the operations of non-U.S. subsidiaries. The GILTI tax is imposed annually based on all current year non-U.S. operations starting January 1, 2018. The Company has elected to record the GILTI tax regime as a periodic tax expense for book purposes. Annually, the Company may elect to credit or deduct foreign taxes for U.S. Federal tax purposes. For the year ended December 31, 2018, the Company plans to elect to credit foreign taxes. The GILTI tax recorded, net of foreign taxes credited, for the year ended December 31, 2018 is not material.


The book value of investments in the stocks of non-U.S. subsidiaries exceeded the tax basis by approximately $226.1 million and $113.2 millionbooks at December 31, 2018 and 2017. If2021 with respect to future non-U.S. withholding taxes the investment in non-U.S. subsidiaries were held for sale instead of being held indefinitely, it is possible additional Company estimated may be imposed on future cash distributions.
U.S. Federal and state tax liabilities may be recorded if the investment in non-U.S. subsidiaries become held for sale instead of being held indefinitely, but calculation of the tax due is not practicable.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was enacted, which included several technical corrections to the Tax Cuts and Jobs Act and provisions allowing certain net operating losses generated by businesses in 2018, 2019, and 2020 to be carried back five years. Overall, the CARES Act had limited impact on the Company’s tax provision for the year ended December 31, 2021.
On July 1, 2015 (the Distribution Date), the Company completed the spin-off of Cable ONE as an independent, publicly traded company. The transaction was structured as a tax-free spin-off of Cable ONE to the stockholders of the Company. Since July 1, 2015, Cable ONE has been an independent public company trading on the New York Stock Exchange under the symbol “CABO”. In connection with the CARES Act, Cable ONE has the ability to carryback its 2019 taxable losses to the tax period from January 1, 2015 to June 30, 2015, the period in which Cable ONE was included in the Company’s 2015 tax return. As a result, the Company amended its 2015 tax returns in order to accommodate Cable ONE’s request to carryback its 2019 taxable losses. The Company does not currently anticipateexpects that withinthis action will have no impact on the next 12 months there will be any events requiringresults or the establishment of any valuation allowances against U.S. Federal net deferred tax assets.
During 2017, the Internal Revenue Service (IRS) completed its examinationfinancial position of the Company’s 2013 tax return andCompany. To reflect the expected refund due to Cable ONE, the Company receivedhas included a $9.7$15.9 million refund primarily relatedcurrent income tax receivable and a corresponding liability to capital loss carryforwards. Cable ONE on its balance sheet as of December 31, 2021.
The 20152018 U.S. Federal tax return and subsequent years remain open to IRS examination. The Company files income tax returns with the U.S. Federal government and in various state, local and non-U.S. governmental jurisdictions, with the consolidated U.S. Federal tax return filing considered the only major tax jurisdiction.
The Company endeavors to comply with tax laws and regulations where it does business, but cannot guarantee that, if challenged, the Company’s interpretation of all relevant tax laws and regulations will prevail and that all tax benefits recorded in the financial statements will ultimately be recognized in full.
The following summarizes the Company’s unrecognized tax benefits, excluding interest and penalties, for the respective periods:
Year Ended December 31Year Ended December 31
(in thousands)2018 2017 2016(in thousands)202120202019
Beginning unrecognized tax benefits$17,331
 $17,331
 $17,331
Beginning unrecognized tax benefits$1,898 $1,572 $2,483 
Increases related to current year tax positions
 
 
Increases related to current year tax positions1,061 742 — 
Increases related to prior year tax positions500
 
 
Increases related to prior year tax positions45 656 1,072 
Decreases related to prior year tax positions(12,187) 
 
Decreases related to prior year tax positions — — 
Decreases related to settlement with tax authorities
 
 
Decreases related to settlement with tax authorities (1,072)(1,291)
Decreases due to lapse of applicable statutes of limitations(3,161) 
 
Decreases due to lapse of applicable statutes of limitations — (692)
Ending unrecognized tax benefits$2,483
 $17,331
 $17,331
Ending unrecognized tax benefits$3,004 $1,898 $1,572 
The unrecognized tax benefits mainly relate to federal and state research and development tax credits applicable to the 2019 to 2021 tax periods, as well as state income tax filing positions applicable to the 2012 to 2014 and 2020 tax period.periods. In making these determinations, the Company presumes that taxing authorities pursuing examinations of the Company’s compliance with tax law filing requirements will have full knowledge of all relevant information, and, if necessary, the Company will pursue resolution of disputed tax positions by appeals or litigation. Although the Company cannot predict the timing of resolution with tax authorities, the Company estimates that some of the
95


unrecognized tax benefits may change in the next 12 months due to settlement with the tax authorities. The Company expects that a $2.5$1.8 million federal tax benefit and a $1.3 million state tax benefit, net of $0.5$0.3 million federal tax expense, will reduce the effective tax rate in the future if the unrecognized tax benefits are recognized.
The Company classifies interest and penalties related to uncertain tax positions as a component of interest and other expenses, respectively. As of December 31, 2018,2021, the Company has not accrued $0.6 million of interest related to the unrecognized tax benefits. The Company has not accrued any penalties related to the unrecognized tax benefits.
10.DEBT
11.    DEBT
The Company’s borrowings consist of the following:
As of December 31As of December 31
(in thousands)2018 2017(in thousands)MaturitiesStated Interest RateEffective Interest Rate20212020
5.75% unsecured notes due June 1, 2026 (1)
$394,675
 $
7.25% unsecured notes due February 1, 2019
 399,507
U.K. Credit facility (2)
82,366
 93,671
Unsecured notes (1)
Unsecured notes (1)
20265.75%5.75%$396,830 $396,112 
Revolving credit facilityRevolving credit facility20231.52% - 3.75%1.63%209,643 74,686 
Truist Bank commercial noteTruist Bank commercial note20292.08% - 2.14%2.12% 25,250 
Truist Bank commercial note (2)
Truist Bank commercial note (2)
20311.84% - 1.85%1.87%24,504 — 
Truist Bank commercial noteTruist Bank commercial note20322.10%2.10%22,500 — 
Pinnacle Bank term loanPinnacle Bank term loan20244.15%4.18%9,558 10,692 
Pinnacle Bank line of creditPinnacle Bank line of credit20223.25%3.56% 2,295 
Other indebtedness96
 109
Other indebtedness2023 - 20300.00% - 16.00%4,466 3,520 
Total Debt477,137
 493,287
Total Debt667,501 512,555 
Less: current portion(6,360) (6,726)Less: current portion(141,749)(6,452)
Total Long-Term Debt$470,777
 $486,561
Total Long-Term Debt$525,752 $506,103 
________________________
(1)The carrying value is net of $5.3
(1)    The carrying value is net of $3.2 million and $3.9 million of unamortized debt issuance costs as of December 31, 2018.
(2)
The carrying value is net of $0.2 millionand$0.4 million of unamortized debt issuance costs as of December 31, 2018 and 2017, respectively.
The Company did not borrow funds under its revolving credit facility in 2018or2017. The Company’s other indebtedness at December 31, 20182021 and 2020, respectively.
(2)    The carrying value is net of $0.1 million of unamortized debt issuance costs as of December 31, 2017, is at an interest rate of 2% and matures in 2026.2021.


On May 30, 2018, the Company issuedThe Company’s $400 million senior unsecured fixed-rate notes (the Notes), due June 1, 2026, (the Notes). The Notes are guaranteed, jointly and severally, on a senior unsecured basis, by certain of the Company’s existing and future domestic subsidiaries, as described in the terms of the indenture, dated as of May 30, 2018 (the Indenture).indenture. The Notes have a coupon rate of 5.75% per annum, payable semi-annually on June 1 and December 1. The Company may redeem the Notes in whole or in part at any time at the respective redemption prices described in the Indenture.indenture. At December 31, 2021 and 2020, the fair value of the Notes, based on quoted market prices (Level 2 fair value assessment), totaled $417.5 million and $421.7 million, respectively.
On June 29,In May 2018, the Company used the net proceeds from the sale of the Notes, together with cash on hand, to redeem the $400 million of 7.25% notes due February 1, 2019. The Company incurred $11.4 million in debt extinguishment costs in relation to the early termination of the 7.25% notes.
In combination with the issuance of the Notes, the Company and certain of the Company’s domestic subsidiaries named therein as guarantors entered into an amended and restated credit agreement providing for a U.S. $300 million unsecured five-year revolving credit facility (the Revolving Credit Facility) with each of the lenders party thereto,that is guaranteed, jointly and severally, by certain of the Company’s foreign subsidiaries from time to time party thereto as foreign borrowers, Wells Fargo Bank, N.A., as Administrative Agent (Wells Fargo), JPMorgan Chase Bank, N.A., as Syndication Agent,existing and HSBC Bank USA, N.A. and Bank of America, N.A. as Documentation Agents (the Amended and Restated Credit Agreement), which amends and restates the Company’s existing Five Year Credit Agreement, dated as of June 29, 2015, among the Company, certain of itsfuture domestic subsidiaries as guarantors, the several lenders from time to time party thereto, Wells Fargo Bank, N.A., as Administrative Agent and JPMorgan Chase Bank, N.A., as Syndication Agent (the Existing Credit Agreement).subsidiaries. The Amended and Restated Credit Agreement amends the Existing Credit Agreement to (i) extend the maturity of the Revolving Credit Facility tomatures on May 30, 2023, unless the Company and the lenders agree to further extend the term, (ii) increase the aggregate principal amount of the Revolving Credit Facility to U.S. $300 million, consisting of a U.S. Dollar tranche of U.S. $200 million for borrowings in U.S. Dollars and a multicurrency tranche equivalent to U.S. $100 million for borrowings in U.S. Dollars and certain foreign currencies, (iii) provide for borrowings under the Revolving Credit Facility in U.S. Dollars and certain other foreign currencies specified in the Amended and Restated Credit Agreement, (iv) permit certain foreign subsidiaries of the Company to be added to the Amended and Restated Credit Agreement as foreign borrowers thereunder and (v) effect certain other modifications to the Existing Credit Agreement.
Under the Amended and Restated Credit Agreement, the Company is required to pay a commitment fee on a quarterly basis, based on the Company’s leverage ratio, of between 0.15% and 0.25% of the amount of the average daily unused portion of the Revolving Credit Facility. Any borrowings under the Amended and Restated Credit Agreement are made on an unsecured basis and bear2023; bears interest at the Company’s option, either at (a) a fluctuating interest rate equal to the highest of Wells Fargo’s prime rate, 0.5 percent above the Federal funds rate or the one-month Eurodollar rate plus 1%, or (b) the Eurodollar rate for the applicable currency and interest period as defined in the Amended and Restated Credit Agreement,agreement, which is generally a periodic rate equal to LIBOR, CDOR, BBSY or SOR as applicable, in the case of each of clauses (a) and (b) plus an applicable margin that depends on the Company’s consolidated debt to consolidated adjusted EBITDA (as determined pursuant toEBITDA; and has a commitment fee based on the AmendedCompany’s leverage ratio, of between 0.15% and Restated Credit Agreement, Total Net Leverage Ratio). The0.25% on the undrawn portion. On November 23, 2021, the Company and its foreign subsidiaries may draw onamended the Revolving Credit Facility to, among other things, update the benchmark interest rates for general corporate purposes. Any outstanding borrowings mustdenominated in (i) U.S. dollars under its U.S. dollar tranche to be repaidbased on SOFR on or priorbefore the USD LIBOR transition date and (ii) British Pound (GBP) and Singapore dollars under its multicurrency tranche to the final termination date.be based on Sterling Overnight Index Average (SONIA) and Singapore Overnight Rate Average (SORA), respectively. The Amended and Restated Credit Agreement contains terms and conditions, including remedies in the event of a default by the Company typical of facilities of this type and requires the Companyis required to maintain a Total Net Leverage Ratio of not greater than 3.5 to 1.0 and a consolidated interest coverage ratio of at least 3.5 to 1.0 based upon the ratio of consolidated adjusted EBITDA to consolidated interest expense as determined pursuant to the Amended and Restated Credit Agreement. Ascredit agreement. The outstanding balance on the Company’s revolving credit facility was $209.6 million as of December 31, 2018, the Company is in compliance2021, consisting of borrowings of $137 million under its U.S. dollar tranche with all financial covenants.interest payable at either 1 month USD LIBOR plus 1.50% or prime rate plus 0.5%, as applicable, and £54 million under its multicurrency tranche with interest payable at SONIA plus 1.50%.
On July 14, 2016, KaplanDecember 28, 2021, the Company’s automotive subsidiary entered into a credit agreement (the Kaplan Credit Agreement) among Kaplan International Holdings Limited, as borrower, the lenders party thereto, HSBC BANK PLC as Facility Agent, and other agents party thereto. The Kaplan Credit Agreement provides for a four-year credit facilitycommercial note with Truist Bank in an aggregate principal amount of £75$22.5 million. Borrowings bearThe commercial note is payable over a 10-year period in monthly installments of $0.2 million, plus accrued and unpaid interest, at a rate per annum of LIBOR plus an applicable interest rate margin between 1.25% and 1.75%, in each case determined on a quarterly basis by reference to a pricing grid based upon the Company’s total leverage ratio. The Kaplan Credit Agreement requires that 6.66% of the amount of the loan be repaiddue on the first three anniversariesday of funding,each month, with a final payment of the remainingoutstanding principal balance due on JulyJanuary 1, 2020.2032. The Kaplan Credit Agreementcommercial note bears interest at variable
96


rates based on SOFR plus 2.05% per annum. The commercial note contains terms and conditions, including remedies in the event of a default by the Company, typicalautomotive subsidiary.
On October 21, 2021, the Company’s automotive subsidiary entered into a commercial note with Truist Bank in an aggregate principal amount of facilities$24.75 million. The commercial note is payable over a 10-year period in monthly installments of $0.1 million, plus accrued and unpaid interest, due on the first day of each month, with a final payment of the outstanding principal balance on October 1, 2031. The commercial note bears interest at variable rates based on SOFR plus 1.8% per annum. The commercial note contains terms and conditions, including remedies in the event of a default by the automotive subsidiary. The automotive subsidiary used the net proceeds from this type and requirescommercial note to repay the Company to maintain a leverage ratio of not greater than 3.5 to 1.0 and a consolidated interest coverage ratio of at least 3.5 to 1.0 based uponoutstanding balance on the ratio of consolidated adjusted EBITDA to consolidated interest expense as determined pursuant to the Kaplan Credit Agreement. As of December 31, 2018, the Company iscommercial note due in compliance with all financial covenants.
On July 25, 2016, Kaplan borrowed £75 million under the Kaplan Credit Agreement.2029. On the same date, Kaplan enteredthe Company’s automotive subsidiary rolled its existing interest rate swap into ana new interest rate swap agreement with a total notional value of £75$24.75 million and a maturity date of JulyOctober 1, 2020.2031. The new interest rate swap agreement will pay Kaplanthe automotive subsidiary variable interest on the £75$24.75 million notional amount atbased on SOFR plus 1.8% per annum and the three-month LIBOR, and Kaplanautomotive subsidiary will pay the counterpartiescounterparty a fixed rate of 0.51%, effectively resulting in a total fixed


interest rate of 2.01% on the outstanding borrowings at the current applicable margin of 1.50%.4.118% per annum. The new interest rate swap agreement was entered into to convert the variable rate British pound borrowing under the Kaplan Credit Agreementthis commercial note into a fixed rate borrowing. The Company provided a guarantee on any borrowings under the Kaplan Credit Agreement. Based on the terms of the new interest rate swap agreement and the underlying borrowing, the new interest rate swap agreement was determined to be effective and thus qualifies as a cash flow hedge. As such, changeshedge.
On January 26, 2021, the GHG subsidiary amended its loan facility with Pinnacle Bank to decrease the principal of the term loan to $10.6 million, bearing interest at 4.15% per annum, and increase the two-year line of credit expiring on December 2, 2022 to $6.0 million, bearing interest at the greater of (a) 3.25% and (b) the sum of one-month LIBOR as in effect on the first business day of each month plus an applicable interest rate of 2.75%.
The fair value of the interest rate swap are recordedCompany’s other debt, which is based on Level 2 inputs, approximates its carrying value as of December 31, 2021 and 2020. The Company is in other comprehensive income oncompliance with all financial covenants of the accompanying Consolidated Balance Sheets until earnings are affected by the variabilityRevolving Credit Facility, commercial notes, and Pinnacle Bank term loan and line of cash flows.credit as of December 31, 2021.
During 20182021 and 2017,2020, the Company had average borrowings outstanding of approximately $517.2$545.2 million and $493.2$512.4 million, respectively, at average annual interest rates of approximately 5.6%4.8% and 6.3%5.1%, respectively. The Company incurred net interest expense of $32.5$30.5 million, $27.3$34.4 million and $32.3$23.6 million during 2018, 20172021, 2020 and 2016,2019, respectively.
In June 2018, the Company incurred $6.2 million of interest expense related to the mandatorily redeemable noncontrolling interest redemption settlement at GHG (see Note 3). The fair value of the mandatorily redeemable noncontrolling interest is based on the redemption value resulting from a negotiated settlement. The Company recorded interest income of $2.3 million and interest expense of $2.7 million forFor the years ended December 31, 20172021 and 2016,2020, the Company recordedinterest expense of $4.1 million and $8.5 million, respectively, to adjust the fair value of the mandatorily redeemable noncontrolling interest. For the year ended December 31, 2019, the Company recorded interest (see Note 3).income of $0.1 million to adjust the fair value of the mandatorily redeemable noncontrolling interest. Fair value adjustments are presented within interest expense and interest income in the Company’s Consolidated Statements of Operations and are reclassified to present the net change in fair value for each reporting period. The fair value of the mandatorily redeemable noncontrolling interest was based on anthe fair value of the underlying subsidiaries owned by GHC One, after taking into account any debt and other noncontrolling interests of its subsidiary investments. The fair value of the owned subsidiaries is determined by reference to either a discounted cash flow or EBITDA multiple, adjusted for working capital and other items, which approximates fair value (Level 3 fair value assessment).
At December 31, 2018, the fair value of the Company’s 5.75% unsecured notes, based on quoted market prices (Level 2 fair value assessment), totaled $406.7 million, compared with the carrying amount of $394.7 million. At December 31, 2017, the fair value of the Company’s 7.25% unsecured notes, based on quoted market prices (Level 2 fair value assessment), totaled $414.7 million, compared with the carrying amount of $399.5 million. The carrying value of the Company’s other unsecured debt at December 31, 2018, approximates fair value.
97


11.FAIR VALUE MEASUREMENTS


12.    FAIR VALUE MEASUREMENTS
The Company’s financial assets and liabilities measured at fair value on a recurring basis were as follows:
 As of December 31, 2018
(in thousands)Level 1 Level 2 Total
Assets     
Money market investments(1) 
$
 $75,500
 $75,500
Marketable equity securities(2) 
496,390
 
 496,390
Other current investments(3) 
11,203
 6,988
 18,191
Interest rate swap (4) 

 369
 369
Total Financial Assets$507,593
 $82,857
 $590,450
Liabilities     
Deferred compensation plan liabilities(5) 
$
 $36,080
 $36,080
As of December 31, 2017As of December 31, 2021
(in thousands)Level 1 Level 2 Level 3 Total(in thousands)Level 1Level 2Level 3Total
Assets          Assets   
Money market investments (1)
$
 $217,628
 $
 $217,628
Marketable equity securities (2)
536,315
 
 
 536,315
Other current investments (3)
9,831
 11,007
 
 20,838
Marketable equity securities (1)
Marketable equity securities (1)
$809,997 $ $ $809,997 
Other current investments (2)
Other current investments (2)
7,230 7,218  14,448 
Total Financial Assets$546,146
 $228,635
 $
 $774,781
Total Financial Assets$817,227 $7,218 $ $824,445 
Liabilities          Liabilities   
Deferred compensation plan liabilities (5)
$
 $43,414
 $
 $43,414
Interest rate swap (6)

 244
 
 244
Deferred compensation plan liabilities (3)
Deferred compensation plan liabilities (3)
$ $31,589 $ $31,589 
Contingent consideration liabilities (4)
Contingent consideration liabilities (4)
  14,881 14,881 
Interest rate swap (5)
Interest rate swap (5)
 2,049  2,049 
Foreign exchange swap (6)
Foreign exchange swap (6)
 484  484 
Mandatorily redeemable noncontrolling interest (7)

 
 10,331
 10,331
Mandatorily redeemable noncontrolling interest (7)
  13,661 13,661 
Total Financial Liabilities$
 $43,658
 $10,331
 $53,989
Total Financial Liabilities$ $34,122 $28,542 $62,664 
As of December 31, 2020
(in thousands)Level 1Level 2Level 3Total
Assets      
Money market investments (8) 
$— $268,841 $— $268,841 
Marketable equity securities (1) 
573,102 — — 573,102 
Other current investments (2) 
10,397 4,083 — 14,480 
Total Financial Assets$583,499 $272,924 $— $856,423 
Liabilities      
Deferred compensation plan liabilities (3) 
$— $31,178 $— $31,178 
Contingent consideration liabilities (4)
— — 37,174 37,174 
Interest rate swap (5) 
— 2,342 — 2,342 
Foreign exchange swap (6)
— 259 — 259 
Mandatorily redeemable noncontrolling interest (7)
— — 9,240 9,240 
Total Financial Liabilities$— $33,779 $46,414 $80,193 
____________
(1)The Company’s money market investments are included in cash, cash equivalents and restricted cash and the value considers the liquidity of the counterparty.
(2)The Company’s investments in marketable equity securities are held in common shares of U.S. and Canadian corporations that are actively traded on U.S. and Canadian stock exchanges. Price quotes for these shares are readily available. Investments in marketable securities were classified as available-for-sale in 2017 prior to the adoption of the new accounting guidance (see Note 2).
(3)(2)Includes U.S. Government Securities, corporate bonds, mutual funds and time deposits. These investments are valued using a market approach based on the quoted market prices of the security or inputs that include quoted market prices for similar instruments and are classified as either Level 1 or Level 2 in the fair value hierarchy.
(4)(3)Included in Deferred Charges and Other Assets. The Company utilized a market approach model using the notional amount of the interest rate swap multiplied by the observable inputs of time to maturity and market interest rates.
(5)Includes Graham Holdings Company’s Deferred Compensation Plan and supplemental savings plan benefits under the Graham Holdings Company’s Supplemental Executive Retirement Plan, which are included in accrued compensation and related benefits. These plans measure the market value of a participant’s balance in a notional investment account that is comprised primarily of mutual funds, which are based on observable market prices. However, since the deferred compensation obligations are not exchanged in an active market, they are classified as Level 2 in the fair value hierarchy. Realized and unrealized gains (losses) on deferred compensation are included in operating income.
(6)(4)Included in Accounts payable and accrued liabilities and Other Liabilities. The Company determined the fair value of the contingent consideration liabilities using either a Monte Carlo simulation or probability-weighted analysis depending on the type of target included in the contingent consideration requirements (revenue, EBITDA, client retention). All analyses included estimated financial projections for the acquired businesses and acquisition-specific discount rates.
(5)Included in Other liabilities.Liabilities. The Company utilized a market approach model using the notional amount of the interest rate swap multiplied by the observable inputs of time to maturity and market interest rates.
(6)Included in Accounts payable and accrued liabilities, and valued based on a valuation model that calculates the differential between the contract price and the market-based forward rate.
(7)The fair value of the mandatorily redeemable noncontrolling interest is based on an EBITDA multiple, adjusted for working capitalthe fair value of the underlying subsidiaries owned by GHC One, after taking into account any debt and other items,noncontrolling interests of its subsidiary investments. The fair value of the owned subsidiaries is determined using enterprise value analyses which approximatesinclude an equal weighing between guideline public company and discounted cash flow analyses.
(8)The Company’s money market investments are included in cash and cash equivalents and the value considers the liquidity of the counterparty.
98


The following table provides a reconciliation of changes in the Company’s financial liabilities measured at fair value on a recurring basis, using Level 3 inputs:
(in thousands)Contingent consideration liabilitiesMandatorily redeemable noncontrolling interest
As of December 31, 2019$13,546 $829 
Acquisition of business50,609 — 
Changes in fair value (1)
(2,051)8,483 
Accretion of value included in net income (1)
2,895 — 
Settlements or distributions(28,061)(72)
Foreign currency exchange rate changes236 — 
As of December 31, 202037,174 9,240 
Acquisition of business1,868  
Changes in fair value (1)
(5,482)4,077 
Capital contributions 427 
Accretion of value included in net income (1)
1,275  
Settlements or distributions(19,942)(83)
Foreign currency exchange rate changes(12) 
As of December 31, 2021$14,881 $13,661 
____________
(1)Changes in fair value.value and accretion of value of contingent consideration liabilities are included in Selling, general and administrative expenses and the changes in fair value of mandatorily redeemable noncontrolling interest is included in Interest expense in the Company’s Consolidated Statements of Operations.
During the year ended December 31, 2018, the Company recorded gains of $11.7 million to equity securities that are accounted for as cost method investments based on observable transactions for identical or similar investments of the same issuer.
For the years ended December 31, 2018, 20172021, 2020 and 2016,2019, the Company recorded goodwill and other long-lived asset impairment charges of $8.1$32.9 million,, $9.6 $30.2 million and $1.6$9.2 million respectively., respectively (see Note 19). The remeasurement of the goodwill and other long-lived assets is classified as a Level 3 fair value assessment due to the significance of unobservable inputs developed in the determination of the fair value. The Company used a discounted cash flow model to determine the estimated fair value of the reporting unit.unit, indefinite-lived intangible assets, and other long-lived assets. A market value approach was also utilized to supplement the discounted cash flow model. The Company made estimates and assumptions regarding future cash flows, royalty rates, discount rates, market values, and long-term growth ratesrates.
For the years ended December 31, 2021, 2020 and market values2019, the Company recorded gains of $11.8 million, $4.2 million, and $5.1 million, respectively, to determineequity securities that are accounted for as cost method investments based on observable transactions for identical or similar investments of the reporting unit’s estimated fair value.
same issuer. For the year ended December 31, 2016,2020, the Company recorded impairment losses of $7.3 million to equity securities that are accounted for as cost method investments.
For the years ended December 31, 2021 and 2020, the Company recorded impairment charges totaling $27.0of $6.6 million toon 1 of its cost method investment relating to a preferred equity interestinvestments in a vocational school company due to a declineaffiliates and $3.6 million on 2 of its investments in business conditions. The measurement of the preferred equity interest is classified as a Level 3 fair value assessment due to the significance of unobservable inputs developed in the determination of the fair value. The Company used a discounted cash flow model to determine the estimated fair value of the preferred equity interest and made estimates and assumptions regarding future cash flows, discount rates, long-term growth rates and market values to determine the estimated fair value.

affiliates, respectively (see Note 4).

12.
13.    REVENUE FROM CONTRACTS WITH CUSTOMERS
Revenue Recognition. The following table presents the Company’s revenue disaggregated by revenue source for the years ended December 31, 2018, 2017 and 2016:
 Year Ended December 31
(in thousands)2018 2017 2016
Education Revenue     
Kaplan international$719,982
 $697,999
 $696,362
Higher education342,085
 431,425
 501,784
Test preparation256,102
 273,298
 286,556
Professional (U.S.)134,187
 115,839
 115,263
Kaplan corporate and other1,142
 294
 214
Intersegment elimination(2,483) (2,079) (1,718)
 1,451,015
 1,516,776
 1,598,461
Television broadcasting505,549
 409,916
 409,718
Manufacturing487,619
 414,193
 241,604
Healthcare149,275
 154,202
 146,962
SocialCode58,728
 62,077
 58,851
Other43,880
 34,733
 26,433
Intersegment elimination(100) (51) (139)
Total Revenue$2,695,966
 $2,591,846
 $2,481,890
The Company generated 78%, 78% and 76% of its revenue from U.S. domestic sales for the year ended December 31, 2018.in 2021, 2020 and 2019, respectively. The remaining 22%, 22%, and 24% of revenue was generated from non-U.S. sales.
For the year ended December 31, 2018,In 2021, 2020 and 2019, the Company recognized 80%67%, 73%, and 73%, respectively, of its revenue over time as control of the services and goods transferred to the customer. The remaining 20%33%, 27% and 27%, respectively, of revenue was recognized at a point in time, when the customer obtained control of the promised goods.
The determination of the method by which the Company measures its progress towards the satisfaction of its performance obligations requires judgment and is described in the Summary of Significant Accounting Policies (Note 2).
In the second quarter of 2020, GHG received $7.4 million under the CARES Act as a general distribution from the Provider Relief Fund to provide relief for lost revenues and expenses incurred in connection with COVID-19. The healthcare revenues for the year ended December 31, 2020 includes $5.7 million for lost revenues related to COVID-19 (see Note 19).
Contract Assets. As of December 31, 2021, the Company recognized a contract asset of $17.7 million related to a contract at a Kaplan International business, which is included in Deferred Charges and Other Assets. The Company expects to recognize an additional $495.9 million related to the remaining performance obligation in the contract over the next eleven years. As of December 31, 2020, the contract asset was $8.7 million.
99


Deferred Revenue. The Company records deferred revenue when cash payments are received or due in advance of the Company’s performance, including amounts which are refundable. The following table presents the change in the Company’s deferred revenue balance during the year ended December 31, 2018:
2021:
As of As of
December 31,
2018
 January 1,
2018
%December 31,
2021
December 31,
2020
%
(in thousands) Change(in thousands)Change
Deferred revenue$311,214
 $342,640
(9)Deferred revenue$363,065 $343,322 6
In April 2020, GHG received $31.5 million under the expanded Medicare Accelerated and Advanced Payment Program modified by the CARES Act as a result of COVID-19. The Department of Health and Human Services began to recoup this advance 365 days after the payment was issued and for the year ended December 31, 2021, $18.9 million of the balance was recognized as revenue for claims submitted for eligible services. The remaining amount is included in the current deferred revenue balance on the Consolidated Balance Sheet as of December 31, 2021. As of December 31, 2020, the $31.5 million balance was included in the current and noncurrent deferred revenue balances on the Consolidated Balance Sheet.
The majority of the change in the deferred revenue balance is relateddue to increased enrollment in the KU Transaction.Kaplan International division as a result of recovery from COVID-19 and current year acquisitions, offset by the advanced Medicare payment. During the year ended December 31, 2018,2021, the Company recognized $259.2$278.6 million related tofrom the Company’s deferred revenue balance as of January 1, 2018.December 31, 2020.
Revenue allocated to remaining performance obligations represents deferred revenue amounts that will be recognized as revenue in future periods. As of December 31, 2018, KTP’s2021, the deferred revenue balance related to certain medical and nursing qualifications with an original contract length greater than twelve months at Kaplan Supplemental Education was $5.6$8.8 million. KTPKaplan Supplemental Education expects to recognize 81%72% of this revenue over the next twelve months and the remainder thereafter.
Costs to Obtain a Contract. The following table presents changes in the Company’s costs to obtain a contract asset during the year ended December 31, 2018:
asset:
(in thousands)
Balance at
Beginning
of Year
 Costs Associated with New Contracts Less: Costs Amortized during the Year Other 
Balance
at
End of
Year
(in thousands)Balance at
Beginning
of Year
Costs Associated with New ContractsLess: Costs Amortized During the YearOtherBalance
at
End of
Year
2018$16,043
 $55,664
 $(49,284) $(1,112) $21,311
20212021$24,363 $61,214 $(59,116)$(380)$26,081 
2020202031,020 51,891 (58,855)307 24,363 
2019201921,311 66,607 (57,741)843 31,020 
The majority of other activity iswas related to currency translation adjustments during the year ended December 31, 2018.

in 2021, 2020, and 2019.

13.CAPITAL STOCK, STOCK AWARDS AND STOCK OPTIONS
14.    CAPITAL STOCK, STOCK AWARDS AND STOCK OPTIONS
Capital Stock. Each share of Class A common stock and Class B common stock participates equally in dividends. The Class B stock has limited voting rights and as a class has the right to elect 30% of the Board of Directors; the Class A stock has unlimited voting rights, including the right to elect a majority of the Board of Directors.
During 2018, 2017,2021, 2020, and 20162019 the Company purchased a total of 199,023, 88,361,93,969, 406,112, and 229,4983,392 shares, respectively, of its Class B common stock at a cost of approximately $118.0$55.7 million,, $50.8 $161.8 million, and $108.9$2.1 million, respectively. On November 9, 2017,September 10, 2020, the Board of Directors authorized the Company to acquirepurchase up to 500,000 shares of its Class B common stock.Common Stock. The Company did not announce a ceiling price or time limit for the purchases. The authorization included 163,237 shares that remained under the previous authorization. At December 31, 2018,2021, the Company had remaining authorization from the Board of Directors to purchase up to 273,655270,182 shares of Class B common stock.
Stock Awards.  In 2012, the Company adopted an incentive compensation plan (the 2012 Plan), which, among other provisions, authorizes the awarding of Class B common stock to key employees in the form of stock awards, stock options and other awards involving the actual transfer of shares. All stock awards, stock options and other awards involving the actual transfer of shares issued subsequent to the adoption of this plan are covered under this incentive compensation plan. Stock awards made under the 2012 Plan are primarily subject to the general restriction that stock awarded to a participant will be forfeited and revert to Company ownership if the participant’s employment terminates before the end of a specified period of service to the Company. Some of the awards are also subject to performance conditions and will be forfeited and revert to Company ownership if the conditions are not met. The number of Class B common shares authorized for issuance under the 2012 Plan is 772,588 shares. At December 31, 2018,2021, there were 575,208545,000 shares reserved for issuance under the 2012 incentive compensation plan. Of this number, 138,131214,760 shares were subject to stock awards and stock options outstanding, and 437,077330,240 shares were available for future awards.
100


Activity related to stock awards under the 2012 incentive compensation plan for the year ended December 31, 20182021 was as follows:
Number of Shares Average Grant-Date Fair Value Number of SharesAverage Grant-Date Fair Value
Beginning of year, unvested51,575
 $744.07
Beginning of year, unvested27,240 $584.24 
Awarded375
 875.40
Awarded20,258 539.36 
Vested(14,275) 694.81
Vested(12,871)522.17 
Forfeited(5,475) 863.21
Forfeited(3,056)598.44 
End of Year, unvested32,200
 747.18
End of Year, unvested31,571 579.37 
For the share awards outstanding at December 31, 2018,2021, the aforementioned restriction willis expected to lapse in 20192023 for 18,50012,820 shares, in 20202025 for 25016,751 shares and in 20212027 for 13,450 shares. Also, in early 2019, the Company issued stock awards of 16,6652,000 shares. Stock-based compensation costs resulting from Company stock awards were $4.4$3.9 million, $8.1$4.1 million and $11.0$4.2 million in 2018, 20172021, 2020 and 2016,2019, respectively.
As of December 31, 2018,2021, there was $3.6$9.8 million of total unrecognized compensation expense related to these awards. That cost is expected to be recognized on a straight-line basis over a weighted average period of 0.92.3 years.
Stock Options. The Company’s 2003 employee stock option plan reserves 1,900,000 shares of the Company’s Class B common stock for options to be granted under the plan. The purchase price of the shares covered by an option cannot be less than the fair value on the grant date. Options generally vest over six years and have a maximum term of ten years. At December 31, 2018, there were 79,001 shares reserved for issuance under this stock option plan, which were all subject to options outstanding.
Stock options granted under the 2012 Plan cannot be less than the fair value on the grant date, generally vest over six years and have a maximum term of ten years. In 2017, a grant was issued that vests over six years.


Activity related to options outstanding for the year ended December 31, 20182021 was as follows:
Number of Shares Average Option Price Number of SharesAverage Option Price
Beginning of year185,520
 $565.65
Beginning of year183,189 $612.16 
Granted
 
Granted  
Exercised(588) 281.18
Exercised  
Expired or forfeited
 
Expired or forfeited  
End of Year184,932
 566.55
End of Year183,189 612.16 
Of the shares covered by options outstanding at the end of 2018, 145,1382021, 118,139 are now exercisable; 17,333 will become exercisable in 2019; 17,334 will become exercisable in 2020; 4,459 will become exercisable in 2021; 333 will13,209 are expected to become exercisable in 2022; and 335 will13,211 are expected to become exercisable in 2023.2023; 12,876 are expected to become exercisable in 2024; 12,877 are expected to become exercisable in 2025; and 12,877 are expected to become exercisable in 2026. For 2018, 20172021, 2020 and 2016,2019, the Company recorded expense of $1.7 million, $2.2 million and $2.0 million, $2.0 million and $2.4 millionrespectively, related to stock options, respectively.options. Information related to stock options outstanding and exercisable at December 31, 2018,2021, is as follows:
 Options Outstanding Options Exercisable Options OutstandingOptions Exercisable
Range of Exercise Prices Shares Outstanding at 12/31/2018 
Weighted
Average
Remaining
Contractual
Life (years)
 Weighted
Average
Exercise
Price
 Shares Exercisable at 12/31/2018 Weighted
Average
Remaining
Contractual
Life (years)
 Weighted
Average
Exercise
Price
Range of Exercise PricesShares Outstanding at 12/31/2021Weighted
Average
Remaining
Contractual
Life (years)
Weighted
Average
Exercise
Price
Shares Exercisable at 12/31/2021Weighted
Average
Remaining
Contractual
Life (years)
Weighted
Average
Exercise
Price
$244–276 3,674
 2.5 $259.19
 3,674
 2.5 $259.19
325 77,258
 2.1 325.26
 77,258
 2.1 325.26
$244$2441,931 0.9$243.85 1,931 0.9$243.85 
42742777,258 8.7426.86 12,876 8.7426.86 
719 77,258
 5.8 719.15
 51,504
 5.8 719.15
71977,258 2.8719.15 77,258 2.8719.15 
805–872 26,742
 7.0 865.02
 12,702
 6.9 866.03
805–87226,742 4.0865.02 26,074 3.9865.51 
 184,932
 4.4 566.55
 145,138
 3.9 510.69
183,189 5.5612.16 118,139 3.7711.83 
At December 31, 2018,2021, the intrinsic value for all options outstanding, exercisable and unvested was $25.8$16.4 million, $25.8$3.4 million and $0.0$13.1 million, respectively. The intrinsic value of a stock option is the amount by which the market value of the underlying stock exceeds the exercise price of the option. The market value of the Company’s stock was $640.58$629.83 at December 31, 2018.2021. At December 31, 2018,2021, there were 39,79465,050 unvested options related to this plan with an average exercise price of $770.29$431.16 and a weighted average remaining contractual term of 6.38.7 years. At December 31, 2017,2020, there were 57,12682,385 unvested options with an average exercise price of $770.67$453.97 and a weighted average remaining contractual term of 7.29.4 years.
As of December 31, 2018,2021, total unrecognized stock-based compensation expense related to stock options was $4.4$5.7 million, which is expected to be recognized on a straight-line basis over a weighted average period of approximately 2.34.7 years. There were 588no options exercised during 2018.2021. There were 77,258 options exercised during 2020. The total intrinsic value of options exercised during 20182020 was $0.2$11.1 million; a tax benefit from these stock option exercises of $0.1$2.9 million was realized. There were 3,4761,743 options exercised during 2017.2019. The total intrinsic value of
101


options exercised during 20172019 was $0.7 million; a tax benefit from these stock option exercises of $0.3 million was realized. There were 4,726 options exercised during 2016. The total intrinsic value of options exercised during 2016 was $1.2$0.6 million; a tax benefit from these option exercises of $0.5$0.2 million was realized.
During 2017,2020, the Company granted 2,00077,258 options at an exercise price above the fair market value of its common stock at the date of grant. The weighted average grant-date fair value of options granted during 20172020 was $120.47.$93.79. No options were granted during 20182021 or 2016.2019.
The fair value of options at date of grant was estimated using the Black-Scholes method utilizing the following assumptions:
20172020
Expected life (years)8
Interest rate2.28%0.53%
Volatility26.93%27.70%
Dividend yield0.85%1.45%
The Company also maintains a stock option plan at Kaplan. Under the provisions of this plan, options are issued with an exercise price equal to the estimated fair value of Kaplan’s common stock, and options vest ratably over the number of years specified (generally four to five years) at the time of the grant. Upon exercise, an option holder may receive Kaplan shares or cash equal to the difference between the exercise price and the then fair value.
At December 31, 2018,2021, a Kaplan senior manager holds 7,206 Kaplan restricted shares. The fair value of Kaplan’s common stock is determined by the Company’s compensation committee of the Board of Directors, and in January


2019, 2022, the committee set the fair value price at $1,575$1,425 per share. No options were awarded during 2018, 2017,2021, 2020, or 2016;2019; no options were exercised during 2018, 20172021, 2020 or 2016;2019; and no options were outstanding at December 31, 2018.2021.
Kaplan recorded stock compensation expense of $0.5$1.3 million, $1.2 in 2021, and a stock compensation credit of $1.1 million and $0.6$1.3 million in 2018, 20172020 and 2016,2019, respectively. At December 31, 2018,2021, the Company’s accrual balance related to the Kaplan restricted shares totaled $11.3$10.3 million. There were no payouts in 2018, 20172021, 2020 or 2016.2019.
Earnings Per Share. The Company’s unvested restricted stock awards contain nonforfeitable rights to dividends and, therefore, are considered participating securities for purposes of computing earnings per share pursuant to the two-class method. The diluted earnings per share computed under the two-class method is lower than the diluted earnings per share computed under the treasury stock method, resulting in the presentation of the lower amount in diluted earnings per share. The computation of earnings per share under the two-class method excludes the income attributable to the unvested restricted stock awards from the numerator and excludes the dilutive impact of those underlying shares from the denominator.
102


The following reflects the Company’s net income and share data used in the basic and diluted earnings per share computations using the two-class method:
Year Ended December 31Year Ended December 31
(in thousands, except per share amounts)2018 2017 2016(in thousands, except per share amounts)202120202019
Numerator:     Numerator:
Numerator for basic earnings per share:     Numerator for basic earnings per share:
Net income attributable to Graham Holdings Company common stockholders$271,206
 $302,044
 $168,590
Net income attributable to Graham Holdings Company common stockholders$352,075 $300,365 $327,855 
Less: Dividends paid–common stock outstanding and unvested restricted shares(28,617) (28,329) (27,325)Less: Dividends paid–common stock outstanding and unvested restricted shares(30,136)(29,970)(29,553)
Undistributed earnings242,589
 273,715
 141,265
Undistributed earnings321,939 270,395 298,302 
Percent allocated to common stockholders99.39% 99.06% 98.79%Percent allocated to common stockholders99.36 %99.45 %99.45 %
241,115
 271,150
 139,562
319,867 268,917 296,665 
Add: Dividends paid–common stock outstanding28,423
 28,060
 26,962
Add: Dividends paid–common stock outstanding29,946 29,812 29,387 
Numerator for basic earnings per share269,538
 299,210
 166,524
Numerator for basic earnings per share349,813 298,729 326,052 
Add: Additional undistributed earnings due to dilutive stock options10
 17
 9
Add: Additional undistributed earnings due to dilutive stock options5 13 
Numerator for diluted earnings per share$269,548
 $299,227
 $166,533
Numerator for diluted earnings per share$349,818 $298,733 $326,065 
Denominator:     Denominator:
Denominator for basic earnings per share:     Denominator for basic earnings per share:
Weighted average shares outstanding5,333
 5,516
 5,559
Weighted average shares outstanding4,951 5,124 5,285 
Add: Effect of dilutive stock options37
 36
 30
Add: Effect of dilutive stock options14 15 42 
Denominator for diluted earnings per share5,370
 5,552
 5,589
Denominator for diluted earnings per share4,965 5,139 5,327 
Graham Holdings Company Common Stockholders: 
  
  
Graham Holdings Company Common Stockholders:   
Basic earnings per share$50.55
 $54.24
 $29.95
Basic earnings per share$70.65 $58.30 $61.70 
Diluted earnings per share$50.20
 $53.89
 $29.80
Diluted earnings per share$70.45 $58.13 $61.21 
____________
Earnings per share amounts may not recalculate due to rounding.
Diluted earnings per share excludes the following weighted average potential common shares, as the effect would be antidilutive, as computed under the treasury stock method:
Year Ended December 31Year Ended December 31
(in thousands)2018 2017 2016(in thousands)202120202019
Weighted average restricted stock23
 30
 40
Weighted average restricted stock13 12 12 
The 2018, 20172021, 2020 and 20162019 diluted earnings per share amounts exclude the effects of 104,000, 104,000181,258 and 102,000104,000 stock options outstanding, respectively, as their inclusion would have been antidilutive due to a market condition. The 2018, 2017
In 2021, 2020 and 2016 diluted earnings per share amounts also exclude the effects of 2,650, 5,250 and 5,450 restricted stock awards, respectively, as their inclusion would have been antidilutive due to a performance condition.
In 2018, 2017 and 2016,2019, the Company declared regular dividends totaling $5.32, $5.08$6.04, $5.80 and $4.84$5.56 per share, respectively.


14.PENSIONS AND OTHER POSTRETIREMENT PLANS
15.    PENSIONS AND OTHER POSTRETIREMENT PLANS
The Company maintains various pension and incentive savings plans and contributed to multiemployer plans on behalf of certain union-represented employee groups. Most of the Company’s employees are covered by these plans. The Company also provides healthcare and life insurance benefits to certain retired employees. These employees become eligible for benefits after meeting age and service requirements.
The Company uses a measurement date of December 31 for its pension and other postretirement benefit plans.
In the first quarter of 2018,December 2019, the Company adopted new guidance which requires the presentation of service cost in the same line item as other compensation costs arisingpurchased an irrevocable group annuity contract from services by employees during the period, while the other componentsan insurance company for $216.8 million to settle $212.1 million of the net periodicoutstanding defined benefit are recognized in non-operating pension obligation related to certain retirees and postretirement benefit income inbeneficiaries. The purchase of the group annuity contract was funded from the assets of the Company’s Consolidated Statementspension plans As a result of Operations.
On March 22, 2018,this transaction, the Company eliminatedwas relieved of all responsibility for these pension obligations and the accrualinsurance company is now required to pay and administer the retirement benefits owed to approximately 3,800 retirees and beneficiaries, with no change to the amount, timing or form of pension benefits for certain Kaplan University employees related to their future service.monthly retirement benefit payments. As a result, the Company remeasured the accumulated and projected benefit obligation of the pension plan as of March 22, 2018, and the Company recorded a curtailmentone-time settlement gain in the first quarter of 2018. The new measurement basis was used for the recognition of the Company’s pension benefit following the remeasurement. The curtailment gain on the Kaplan University transaction is included in the gain on the Kaplan University transaction and reported in Other income (expense), net on the Consolidated Statements of Operations.$91.7 million.
On October 31, 2018, the Company made certain changes to the other postretirement plans, including changes in eligibility, cost sharing and surviving spouse coverage. As a result, the Company remeasured the accumulated and projected benefit obligation of the other postretirement plans as of October 31, 2018, and the Company recorded a curtailment gain in the fourth quarter of 2018. The new measurement basis was used for the recognition of the Company’s other postretirement plans cost following the remeasurement.
Defined Benefit Plans. The Company’s defined benefit pension plans consist of various pension plans and a Supplemental Executive Retirement Plan (SERP) offered to certain executives of the Company.
103


In the fourthsecond quarter of 2018, the Company offered certain terminated participants with a vested pension benefit an opportunity to take their benefits in the form of a lump sum or an annuity. Most of the participants that elected a lump sum benefit under the program were paid in December 2018. Additional lump sum payments were paid in early 2019. The Company recorded a $26.9 million settlement gain related to the bulk lump sum pension program offering.
In the fourth quarter of 2017,2021, the Company recorded $0.9$1.1 million in expenses related to a Separation Incentive Program (SIP) for certain Dekko employees, which will be funded from the assets of the Company’s pension plans.
In the second quarter of 2020, the Company recorded $6.0 million in expenses related to a SIP for certain Kaplan, Code3 and Decile employees, which was funded from the assets of the Company’s pension plans. In the third quarter of 2020, the Company recorded $7.8 million in expenses related to a SIP for certain Kaplan employees, which was funded from the assets of the Company’s pension plan. plans.
In the thirdsecond quarter of 2017,2019, the Company recorded $0.9 million related tooffered a Separation Incentive ProgramSIP for certain ForneyKaplan employees, which was funded from the assets of the Company’s pension plan.
In the fourth quarter of 2016, the Company offered certain terminated participants with a vested pension benefit an opportunity to take their benefits in the form of a lump sum or an annuity. Most of the participants that elected a lump sum benefit under the program were paid in December 2016. Additional lump sum payments were paid in early 2017.plans. The Company recorded an $18.0$6.4 million settlement gainin expense related to the bulk lump sum pension program offering.SIP for 2019.


The following table sets forth obligation, asset and funding information for the Company’s defined benefit pension plans:
 Pension Plans
 As of December 31
(in thousands)2018 2017
Change in Benefit Obligation   
Benefit obligation at beginning of year$1,286,694
 $1,160,897
Service cost18,221
 18,687
Interest cost46,787
 47,925
Amendments7,183
 75
Actuarial (gain) loss(81,851) 73,191
Acquisitions
 58,600
Benefits paid(63,852) (74,506)
Special termination benefits
 1,825
Curtailment(836) 
Settlement(95,777) 
Benefit Obligation at End of Year$1,116,569
 $1,286,694
Change in Plan Assets   
Fair value of assets at beginning of year$2,343,471
 $2,042,490
Actual return on plan assets(63,715) 375,487
Benefits paid(63,852) (74,506)
Settlement(95,777) 
Fair Value of Assets at End of Year$2,120,127
 $2,343,471
Funded Status$1,003,558
 $1,056,777
SERPPension Plans
As of December 31As of December 31
(in thousands)2018 2017(in thousands)20212020
Change in Benefit Obligation   Change in Benefit Obligation
Benefit obligation at beginning of year$110,082
 $106,526
Benefit obligation at beginning of year$1,095,117 $1,020,356 
Service cost819
 858
Service cost22,991 22,656 
Interest cost3,865
 4,233
Interest cost26,917 32,587 
Amendments1,028
 
Amendments2 69 
Actuarial (gain) loss(7,552) 4,041
Actuarial lossActuarial loss5,660 78,900 
Benefits paid(5,694) (5,576)Benefits paid(63,510)(73,232)
Special termination benefitsSpecial termination benefits1,132 13,781 
Benefit Obligation at End of Year$102,548
 $110,082
Benefit Obligation at End of Year$1,088,309 $1,095,117 
Change in Plan Assets   Change in Plan Assets  
Fair value of assets at beginning of year$
 $
Fair value of assets at beginning of year$2,803,422 $2,312,706 
Employer contributions5,694
 5,576
Actual return on plan assetsActual return on plan assets654,911 563,948 
Benefits paid(5,694) (5,576)Benefits paid(63,510)(73,232)
Fair Value of Assets at End of Year$
 $
Fair Value of Assets at End of Year$3,394,823 $2,803,422 
Funded Status$(102,548) $(110,082)Funded Status$2,306,514 $1,708,305 
SERP
As of December 31
(in thousands)20212020
Change in Benefit Obligation  
Benefit obligation at beginning of year$122,299 $116,193 
Service cost1,022 954 
Interest cost2,943 3,678 
Actuarial (gain) loss(7,640)7,448 
Benefits paid(5,918)(5,974)
Benefit Obligation at End of Year$112,706 $122,299 
Change in Plan Assets 
Fair value of assets at beginning of year$ $— 
Employer contributions5,918 5,974 
Benefits paid(5,918)(5,974)
Fair Value of Assets at End of Year$ $— 
Funded Status$(112,706)$(122,299)
The change in the Company’s benefit obligationobligations for the pension plans was primarily due to benefits paid during the settlement gain recognized related to the bulk lump sum pension program offering and an actuarial gain recognized as a result of an increase to the discount rate used to measure the benefit obligation.year. The change in the benefit obligationobligations for the Company’s SERP was due to the recognition of an actuarial gain resulting from an increase to the discount rate used to measure the benefit obligation.obligation and benefits paid during the year.
The accumulated benefit obligation for the Company’s pension plans at December 31, 20182021 and 2017,2020, was $1,097.3$1,052.7 million and $1,261.8$1,064.3 million, respectively. The accumulated benefit obligation for the Company’s SERP at
104


December 31, 20182021 and 2017,2020, was $102.2$112.2 million and $108.0$121.7 million, respectively. The amounts recognized in the Company’s Consolidated Balance Sheets for its defined benefit pension plans are as follows:
Pension Plans SERPPension PlansSERP
As of December 31 As of December 31As of December 31As of December 31
(in thousands)2018 2017 2018 2017(in thousands)2021202020212020
Noncurrent asset$1,003,558
 $1,056,777
 $
 $
Noncurrent asset$2,306,514 $1,708,305 $ $— 
       
Current liability
 
 (6,321) (5,838)Current liability — (6,334)(6,495)
Noncurrent liability
 
 (96,227) (104,244)Noncurrent liability — (106,372)(115,804)
Recognized Asset (Liability)$1,003,558
 $1,056,777
 $(102,548) $(110,082)Recognized Asset (Liability)$2,306,514 $1,708,305 $(112,706)$(122,299)


Key assumptions utilized for determining the benefit obligation are as follows:
Pension Plans SERPPension PlansSERP
As of December 31 As of December 31As of December 31As of December 31
2018 2017 2018 2017 2021202020212020
Discount rate4.3% 3.6% 4.3% 3.6%Discount rate2.9%2.5%2.9%2.5%
Rate of compensation increase – age graded5.0%–1.0% 5.0%–1.0% 5.0%–1.0% 5.0%–1.0%Rate of compensation increase – age graded5.0%–1.0%5.0%–1.0%5.0%–1.0%5.0%–1.0%
Cash balance interest crediting rate3.50% with phase in to 4.30% in 2021 2.23% with phase in to 3.00% in 2020  Cash balance interest crediting rate1.41% with phase in to 2.90% in 20241.41% with phase in to 2.50% in 2023
The Company made no contributions to its pension plans in 20182021 and 2017,2020, and the Company does not expect to make any contributions in 2019.2022. The Company made contributions to its SERP of $5.7$5.9 million and $5.6$6.0 million for the years ended December 31, 20182021 and 2017,2020, respectively. As the plan is unfunded, the Company makes contributions to the SERP based on actual benefit payments.
At December 31, 2018,2021, future estimated benefit payments, excluding charges for early retirement programs, are as follows:
(in thousands)Pension Plans SERP
2019$76,245
 $6,456
2020$76,715
 $6,743
2021$75,956
 $6,946
2022$75,909
 $7,078
2023$75,389
 $7,149
2024–2028$367,130
 $35,656
(in thousands)Pension PlansSERP
2022$61,330 $6,425 
202361,487 6,706 
202462,710 6,897 
202563,299 7,029 
202663,102 7,118 
2027–2031316,913 35,476 
The total (benefit) cost arising from the Company’s defined benefit pension plans consists of the following components:
Pension Plans
Year Ended December 31
(in thousands)202120202019
Service cost$22,991 $22,656 $20,422 
Interest cost26,917 32,587 46,821 
Expected return on assets(137,878)(113,427)(122,790)
Amortization of prior service cost2,846 2,830 2,882 
Recognized actuarial gain(7,906)— — 
Net Periodic Benefit for the Year(93,030)(55,354)(52,665)
Settlement — (91,676)
Special separation benefit expense1,132 13,781 6,432 
Total Benefit for the Year$(91,898)$(41,573)$(137,909)
Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income   
Current year actuarial gain$(511,373)$(371,621)$(245,402)
Current year prior service cost2 69 5,725 
Amortization of prior service cost(2,846)(2,830)(2,882)
Recognized net actuarial gain7,906 — — 
Curtailment and settlement — 91,676 
Total Recognized in Other Comprehensive Income (Before Tax Effects)$(506,311)$(374,382)$(150,883)
Total Recognized in Total Benefit and Other Comprehensive Income (Before Tax Effects)$(598,209)$(415,955)$(288,792)
105


 Pension Plans
 Year Ended December 31
(in thousands)2018 2017 2016
Service cost$18,221
 $18,687
 $20,461
Interest cost46,787
 47,925
 51,608
Expected return on assets(129,220) (121,411) (121,470)
Amortization of prior service cost150
 170
 297
Recognized actuarial gain(9,969) (4,410) 
Net Periodic Benefit for the Year(74,031) (59,039) (49,104)
Curtailment(806) 
 
Settlement(26,917) 
 (17,993)
Early retirement programs and special separation benefit expense
 1,825
 
Total Benefit for the Year$(101,754) $(57,214) $(67,097)
Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income     
Current year actuarial loss (gain)$111,084
 $(180,885) $147,779
Current year prior service cost7,183
 75
 
Amortization of prior service cost(150) (170) (297)
Recognized net actuarial gain9,969
 4,410
 
Curtailment and settlement26,887
 
 17,993
Total Recognized in Other Comprehensive Income (Before Tax Effects)$154,973
 $(176,570) $165,475
Total Recognized in Total Benefit and Other Comprehensive Income (Before Tax Effects)$53,219
 $(233,784) $98,378
SERP
Year Ended December 31
(in thousands)202120202019
Service cost$1,022 $954 $858 
Interest cost2,943 3,678 4,314 
Amortization of prior service cost331 331 339 
Recognized actuarial loss5,930 5,267 2,314 
Total Cost for the Year$10,226 $10,230 $7,825 
Other Changes in Benefit Obligations Recognized in Other Comprehensive Income
Current year actuarial (gain) loss$(7,640)$7,448 $15,544 
Amortization of prior service cost(331)(331)(339)
Recognized net actuarial loss(5,930)(5,267)(2,314)
Total Recognized in Other Comprehensive Income (Before Tax Effects)$(13,901)$1,850 $12,891 
Total Recognized in Total Cost and Other Comprehensive Income (Before Tax Effects)$(3,675)$12,080 $20,716 


 SERP
 Year Ended December 31
(in thousands)2018 2017 2016
Service cost$819
 $858
 $985
Interest cost3,865
 4,233
 4,384
Amortization of prior service cost311
 455
 457
Recognized actuarial loss2,403
 1,774
 2,659
Total Cost for the Year$7,398
 $7,320
 $8,485
Other Changes in Benefit Obligations Recognized in Other Comprehensive Income     
Current year actuarial (gain) loss$(7,552) $4,041
 $1,120
Current year prior service cost1,028
 
 
Amortization of prior service cost(311) (455) (457)
Recognized net actuarial loss(2,403) (1,774) (2,659)
Total Recognized in Other Comprehensive Income (Before Tax Effects)$(9,238) $1,812
 $(1,996)
Total Recognized in Total Cost and Other Comprehensive Income (Before Tax Effects)$(1,840) $9,132
 $6,489
The costs for the Company’s defined benefit pension plans are actuarially determined. Below are the key assumptions utilized to determine periodic cost:
Pension PlansSERP
Pension Plans SERPYear Ended December 31Year Ended December 31
Year Ended December 31 Year Ended December 31202120202019202120202019
2018 2017 2016 2018 2017 2016
Discount rate (1)
4.0%/3.6% 4.1% 4.3% 3.6% 4.1% 4.3%
Discount rateDiscount rate2.5%3.3%4.3%2.5%3.3%4.3%
Expected return on plan assets6.25% 6.25% 6.5%   Expected return on plan assets6.25%6.25%6.25%
Rate of compensation increaseAge graded
(5.0%–1.0%)
 Age graded
(5.0%–1.0%)
 4.0% Age graded
(5.0%–1.0%)
 Age graded
(5.0%–1.0%)
 4.0%
Rate of compensation increase – age gradedRate of compensation increase – age graded5.0%–1.0%5.0%–1.0%5.0%–1.0%5.0%–1.0%5.0%–1.0%5.0%–1.0%
Cash balance interest crediting rate2.23% with phase in to 3.00% in 2020 1.57% with phase in to 3.00% in 2020 1.41% with phase in to 3.00% in 2019   Cash balance interest crediting rate1.41% with phase in to 2.50% in 20232.77% with phase in to 3.30% in 20223.45% with phase in to 4.30% in 2021
____________
(1)As a result of the Kaplan University transaction, the Company remeasured the accumulated and projected benefit obligation of the pension plan as of March 22, 2018. The remeasurement changed the discount rate from 3.6% for the period January 1 to March 23, 2018 to 4.0% for the period after March 23, 2018.
Accumulated other comprehensive income (AOCI) includes the following components of unrecognized net periodic cost for the defined benefit plans:
Pension Plans SERPPension PlansSERP
As of December 31 As of December 31As of December 31As of December 31
(in thousands)2018 2017 2018 2017(in thousands)2021202020212020
Unrecognized actuarial (gain) loss$(313,809) $(461,779) $17,270
 $27,225
Unrecognized actuarial (gain) loss$(1,342,623)$(839,156)$19,111 $32,681 
Unrecognized prior service cost7,273
 270
 1,037
 320
Unrecognized prior service cost4,511 7,355 36 367 
Gross Amount(306,536) (461,509) 18,307
 27,545
Gross Amount(1,338,112)(831,801)19,147 33,048 
Deferred tax liability (asset)82,765
 124,607
 (4,943) (7,437)Deferred tax liability (asset)355,078 224,586 (5,340)(8,923)
Net Amount$(223,771) $(336,902) $13,364
 $20,108
Net Amount$(983,034)$(607,215)$13,807 $24,125 
Defined Benefit Plan Assets. The Company’s defined benefit pension obligations are funded by a portfolio made up of private investment funds, a U.S. stock index fund, and 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 plans were allocated as follows:
As of December 31As of December 31
2018 201720212020
U.S. equities53% 53%U.S. equities61 %58 %
Private investment fundsPrivate investment funds17 %18 %
U.S. stock index fund28% 30%U.S. stock index fund9 %%
International equitiesInternational equities9 %%
U.S. fixed income13% 11%U.S. fixed income4 %%
International equities6% 6%
100% 100% 100 %100 %
The Company manages approximately 46%39% of the pension assets internally, of which the majority is invested in a U.S. stock index fundprivate investment funds with the remaining investments in Berkshire Hathaway stock, a U.S. stock index fund, and short-term fixed-income securities. The remaining 54%61% of plan assets are managed by two2 investment companies. The goal of the investment managers 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. One investment manager cannot invest more than 15% of the assets at the time of

106



investments.purchase in the stock of Alphabet and Berkshire Hathaway, and no more than 30% of the assets it manages in specified international exchanges at the time the investment is made. The other investment managersmanager cannot invest more than 20% of the assets at the time of purchase in the stock of Berkshire Hathaway, orand no more than 15% of the assets it manages 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. Excluding the exceptions noted above, the investment managers cannot invest 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 December 31, 2018, 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 December 31, 2018.2021. 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 December 31, 2018 and 2017,2021, the pension plan held investments in one1 common stock and one U.S. stock index1 private investment fund that exceeded 10% of total plan assets. These investments wereassets, valued at $945.6$998.8 million, and $1,079.3 million ator approximately 29% of total plan assets. At December 31, 20182020, the pension plan held investments in 1 common stock and 2017, respectively,1 private investment fund that exceeded 10% of total plan assets, valued at $850.6 million, or approximately 45% and 46%, respectively,30% of total plan assets.
The Company’s pension plan assets measured at fair value on a recurring basis were as follows:
 As of December 31, 2018
(in thousands)Level 1 Level 2 Level 3 Total
Cash equivalents and other short-term investments$2,068
 $269,544
 $
 $271,612
Equity securities       
U.S. equities1,115,323
 
 
 1,115,323
International equities131,912
 
 
 131,912
U.S. stock index fund
 
 601,395
 601,395
Total Investments$1,249,303
 $269,544
 $601,395
 $2,120,242
Payable for settlement of investments purchased, net      (115)
Total      $2,120,127
As of December 31, 2017As of December 31, 2021
(in thousands)Level 1 Level 2 Level 3 Total(in thousands)Level 1Level 2Level 3Total
Cash equivalents and other short-term investments$73,877
 $181,638
 $
 $255,515
Cash equivalents and other short-term investments$2,159 $145,683 $ $147,842 
Equity securities       Equity securities
U.S. equities1,242,139
 
 
 1,242,139
U.S. equities2,067,152   2,067,152 
International equities138,640
 
 
 138,640
International equities301,640   301,640 
Private investment fundsPrivate investment funds  573,970 573,970 
U.S. stock index fund
 
 706,202
 706,202
U.S. stock index fund  302,478 302,478 
Total Investments$1,454,656
 $181,638
 $706,202
 $2,342,496
Total Investments$2,370,951 $145,683 $876,448 $3,393,082 
Receivables      975
Receivables, netReceivables, net 1,741 
Total      $2,343,471
Total $3,394,823 
As of December 31, 2020
(in thousands)Level 1Level 2Level 3Total
Cash equivalents and other short-term investments$2,218 $197,655 $— $199,873 
Equity securities
U.S. equities1,614,879 — — 1,614,879 
International equities233,818 — — 233,818 
Private investment fund— — 496,458 496,458 
U.S. stock index fund— — 256,291 256,291 
Total Investments$1,850,915 $197,655 $752,749 $2,801,319 
Receivables, net 2,103 
Total $2,803,422 
Cash equivalents and other short-term investments.  These investments are primarily held in U.S. Treasury securities and registered money market funds. These investments are valued using a market approach based on the quoted market prices of the security or inputs that include quoted market prices for similar instruments and are classified as either Level 1 or Level 2 in the valuation hierarchy.
U.S. equities.  These investments are held in common and preferred stock of U.S. corporations and American Depositary Receipts (ADRs) traded on U.S. exchanges. Common and preferred shares and ADRs are traded actively on exchanges, and price quotes for these shares are readily available. These investments are classified as Level 1 in the valuation hierarchy.
International equities. These investments are held in common and preferred stock issued by non-U.S. corporations. Common and preferred shares are traded actively on exchanges, and price quotes for these shares are readily available. These investments are classified as Level 1 in the valuation hierarchy.
107


Private investment funds. This category includes a commingled fund and a private investment fund. The commingled fund invests in a diversified mix of publicly-traded securities (U.S. and international stocks) and private companies. The private investment fund invests in non-public companies. These investment funds have restrictions that limit the Company’s ability to liquidate its investments. The investment in the commingled fund may be redeemed in part, or in full, at the 60-month anniversary of the investment, or at any subsequent 36-month anniversary date following the initial 60-month anniversary. The investment in the private investment fund is generally not redeemable until the dissolution of the fund. The funds are valued using the net asset value (NAV) provided by the administrator of the funds and reviewed by the Company. The NAV is based on the value of the underlying assets owned by the fund, minus liabilities and divided by the number of units outstanding. These investments are classified as Level 3 in the valuation hierarchy.
U.S. stock index fund. This fund consists of investments held in a diversified mix of securities (U.S. and international stocks, and fixed-income securities) and a combination of other collective funds that together are designed to track the performance of the S&P 500 Index. The fund is valued using the net asset value (NAV)NAV provided by the administrator of the fund and reviewed by the Company. The NAV is based on the value of the underlying assets owned by the fund, minus liabilities and divided by the number of units outstanding. The


investment in this fund may be redeemed daily, subject to the restrictions of the fund. This investment is classified as Level 3 in the valuation hierarchy.
The following table provides a reconciliation of changes in pension assets measured at fair value on a recurring basis, using Level 3 inputs:
U.S. Stock Index Fund
Year Ended December 31
(in thousands)2018 2017(in thousands)Private
Investment Funds
U.S. Stock
Index Fund
Balance at Beginning of Year$706,202
 $622,865
As of December 31, 2019As of December 31, 2019$151,854 $322,229 
Purchases, sales, and settlements, netPurchases, sales, and settlements, net130,000 (100,000)
Actual return on plan assets:Actual return on plan assets:
Losses relating to assets soldLosses relating to assets sold— (5,763)
Gains relating to assets still held at year-endGains relating to assets still held at year-end214,604 39,825 
As of December 31, 2020As of December 31, 2020496,458 256,291 
Purchases, sales, and settlements, net(80,000) (50,000)Purchases, sales, and settlements, net3,912 (25,000)
Actual return on plan assets:   Actual return on plan assets:
Gains relating to assets sold2,819
 6,796
Gains relating to assets sold 3,715 
(Losses) gains relating to assets still held at year-end(27,626) 126,541
Balance at End of Year$601,395
 $706,202
Gains relating to assets still held at year-endGains relating to assets still held at year-end73,600 67,472 
As of December 31, 2021As of December 31, 2021$573,970 $302,478 
Other Postretirement Plans. The following table sets forth obligation, asset and funding information for the Company’s other postretirement plans:
Postretirement PlansPostretirement Plans
As of December 31As of December 31
(in thousands)2018 2017(in thousands)20212020
Change in Benefit Obligation   Change in Benefit Obligation  
Benefit obligation at beginning of year$22,785
 $24,171
Benefit obligation at beginning of year$5,587 $6,816 
Service cost892
 1,028
Interest cost620
 779
Interest cost92 167 
Amendments(12,473) 
Actuarial gain(2,519) (2,830)Actuarial gain(582)(991)
Acquisitions
 516
Benefits paid, net of Medicare subsidy(782) (879)Benefits paid, net of Medicare subsidy(375)(405)
Benefit Obligation at End of Year$8,523
 $22,785
Benefit Obligation at End of Year$4,722 $5,587 
Change in Plan Assets   Change in Plan Assets  
Fair value of assets at beginning of year$
 $
Fair value of assets at beginning of year$ $— 
Employer contributions782
 879
Employer contributions375 405 
Benefits paid, net of Medicare subsidy(782) (879)Benefits paid, net of Medicare subsidy(375)(405)
Fair Value of Assets at End of Year$
 $
Fair Value of Assets at End of Year$ $— 
Funded Status$(8,523) $(22,785)Funded Status$(4,722)$(5,587)
The change in the benefit obligation for the Company’s other postretirement plans was primarily due to the impact of amendments to the plans, including changes to eligibility, cost sharing and surviving spouse coverage, as well asupdated claims experience based on actual premium rates, the recognition of an actuarial gain resulting from an increase to the discount rate used to measure the benefit obligation.obligation, and benefits paid during the year.
108


The amounts recognized in the Company’s Consolidated Balance Sheets for its other postretirement plans are as follows:
Postretirement PlansPostretirement Plans
As of December 31As of December 31
(in thousands)2018 2017(in thousands)20212020
Current liability$(1,399) $(1,920)Current liability$(671)$(797)
Noncurrent liability(7,124) (20,865)Noncurrent liability(4,051)(4,790)
Recognized Liability$(8,523) $(22,785)Recognized Liability$(4,722)$(5,587)
The discount rates utilized for determining the benefit obligation at December 31, 20182021 and 2017,2020, for the postretirement plans were 3.69%2.23% and 3.11%1.78%, respectively. The assumed healthcare cost trend rate used in measuring the postretirement benefit obligation at December 31, 2018,2021, was 7.41%6.17% for pre-age 65, decreasing to 4.5% in the year 20262032 and thereafter. The assumed healthcare cost trend rate used in measuring the postretirement benefit obligation at December 31, 2018,2021, was 7.96%6.52% for post-age 65, decreasing to 4.5% in the year 20262032 and thereafter. The assumed healthcare cost trend rate used in measuring the postretirement benefit obligation at December 31, 2018,2021, was 12.74%8.00% for Medicare Advantage, decreasing to 4.5% in the year 20282032 and thereafter.
The Company made contributions to its postretirement benefit plans of $0.8$0.4 million and $0.9 million for each of the years ended December 31, 20182021 and 2017, respectively.2020. As the plans are unfunded, the Company makes contributions to its postretirement plans based on actual benefit payments.


At December 31, 2018,2021, future estimated benefit payments are as follows:
(in thousands)
Postretirement
Plans
2019$1,399
2020$1,273
2021$1,083
2022$1,015
2023$856
2024–2028$2,308
(in thousands)Postretirement
Plans
2022$671 
2023$590 
2024$485 
2025$393 
2026$335 
2027–2031$2,474 
The total (benefit) costbenefit arising from the Company’s other postretirement plans consists of the following components:
Postretirement Plans
Year Ended December 31
(in thousands)202120202019
Interest cost$92 $167 $289 
Amortization of prior service credit(7)(481)(7,363)
Recognized actuarial gain(3,510)(4,048)(4,360)
Net Periodic Benefit for the Year(3,425)(4,362)(11,434)
Settlement(120)— — 
Total Benefit for the Year$(3,545)$(4,362)$(11,434)
Other Changes in Benefit Obligations Recognized in Other Comprehensive Income
Current year actuarial gain$(582)$(991)$(1,246)
Amortization of prior service credit7 481 7,363 
Recognized actuarial gain3,510 4,048 4,360 
Settlement120 — — 
Total Recognized in Other Comprehensive Income (Before Tax Effects)$3,055 $3,538 $10,477 
Total Recognized in Benefit and Other Comprehensive Income (Before Tax Effects)$(490)$(824)$(957)
109


 Postretirement Plans
 Year Ended December 31
(in thousands)2018 2017 2016
Service cost$892
 $1,028
 $1,386
Interest cost620
 779
 1,230
Amortization of prior service credit(1,408) (148) (335)
Recognized actuarial gain(3,783) (3,891) (1,502)
Net Periodic (Benefit) Cost for the Year(3,679) (2,232) 779
Curtailment(3,380) 
 
Total (Benefit) Cost for the Year$(7,059) $(2,232) $779
Other Changes in Benefit Obligations Recognized in Other Comprehensive Income     
Current year actuarial gain$(2,519) $(2,830) $(14,984)
Current year prior service credit(12,473) 
 
Amortization of prior service credit1,408
 148
 335
Recognized actuarial gain3,783
 3,891
 1,502
Curtailment and settlement3,380
 
 
Total Recognized in Other Comprehensive Income (Before Tax Effects)$(6,421) $1,209
 $(13,147)
Total Recognized in (Benefit) Cost and Other Comprehensive Income (Before Tax Effects)$(13,480) $(1,023) $(12,368)
The costs for the Company’s postretirement plans are actuarially determined. As a result of the changes to the postretirement plans, the Company remeasured the accumulated and projected benefit obligation of the postretirement plan as of October 31, 2018. The remeasurement changed the discount rate from 3.11% for the period January 1 through October 31, 2018 to 4.04% for the period November 1 to December 31, 2018. The discount rates utilized to determine periodic cost for the years ended December 31, 20172021, 2020 and 2016,2019 were 3.31%1.78%, 2.68% and 3.45%, respectively.3.69%. AOCI included the following components of unrecognized net periodic benefit for the postretirement plans:
As of December 31As of December 31
(in thousands)2018 2017(in thousands)20212020
Unrecognized actuarial gain$(22,861) $(24,125)Unrecognized actuarial gain$(13,642)$(16,690)
Unrecognized prior service credit(7,863) (178)Unrecognized prior service credit(12)(19)
Gross Amount(30,724) (24,303)Gross Amount(13,654)(16,709)
Deferred tax liability8,295
 6,561
Deferred tax liability3,724 4,512 
Net Amount$(22,429) $(17,742)Net Amount$(9,930)$(12,197)
Multiemployer Pension Plans.  In 2018, 20172021, 2020 and 2016,2019, the Company contributed to one1 multiemployer defined benefit pension plan under the terms of a collective-bargaining agreement that covered certain union-represented employees. The Company’s total contributions to the multiemployer pension plan amounted to $0.1 million in each year for 2018, 20172021, 2020 and 2016.2019.
Savings Plans. The Company recorded expense associated with retirement benefits provided under incentive savings plans (primarily 401(k) plans) of approximately $8.6$10.9 million in 2018 and $7.52021, $8.8 million in 20172020 and2016.

$9.8 million in 2019.

15.OTHER NON-OPERATING INCOME (EXPENSE)
16.    OTHER NON-OPERATING INCOME
A summary of non-operating income (expense) is as follows:
 Year Ended December 31
(in thousands)2018 2017 2016
Loss on guarantor obligations$(17,518) $
 $
Net gain on cost method investments11,663
 
 
Net gain (loss) on sales of businesses8,157
 (569) 18,931
Foreign currency (loss) gain, net(3,844) 3,310
 (39,890)
Gain on sale of cost method investments2,845
 16
 794
Impairment of cost method investments(2,697) (200) (29,365)
Net gain on sale of property, plant and equipment2,539
 
 34,072
Gain on formation of a joint venture
 
 3,232
Net losses on sales or write-down of marketable equity securities
 
 (1,791)
Other, net958
 1,684
 1,375
Total Other Non-Operating Income (Expense)$2,103
 $4,241
 $(12,642)
Year Ended December 31
(in thousands)202120202019
Net gain on cost method investments$11,756 $4,209 $5,080 
Gain on sale of cost method investments9,355 1,039 267 
Net gain (loss) on sale of businesses3,789 213,302 (564)
Foreign currency loss, net(179)(2,153)(1,070)
Impairment of cost method investments (7,327)— 
Gain on acquiring a controlling interest in an equity affiliate 3,708 — 
Gain on sale of equity affiliates 1,370 28,994 
Other, net7,833 386 (276)
Total Other Non-Operating Income$32,554 $214,534 $32,431 
In 2018, the Company recorded a $17.5 million loss in guarantor lease obligations in connection with the sale of the KHE Campuses business.
In the third quarter of 2018, the Company recorded an $8.5 million gain resultingThe gains on cost method investments result from observable price changes in the fair value of the underlying equity securities accounted for under the cost method. method (see Notes 4 and 12).
For the years ended December 31, 2021, 2020 and 2019, the Company recorded contingent consideration gains of $3.9 million, $3.5 million and $1.4 million, respectively, related to the disposition of Kaplan University (KU) in 2018.
In the second quarter of 2020, the Company made an additional investment in Framebridge (see Notes 3 and 4) that resulted in the Company obtaining control of the investee. The Company remeasured its previously held equity interest in Framebridge at the acquisition-date fair value and recorded a gain of $3.7 million. The fair value was determined using a market approach by using the share value indicated in the transaction.
In the fourth quarter of 2018, an additional $3.2 million gain was recorded.
In 2018,2020, the Company recorded an $8.2a $209.8 million gain on the sale of three businesses in the education division, including a gain of $4.3 million on the Kaplan University transaction and$1.9 million in contingent consideration gains related to the sale of a business (see Note 3).
In the third quarter of 2016, the Company recorded an impairment of $15.0 million to the preferred equity interest in a vocational school company. In the fourth quarter of 2016, an additional $12.0 million impairment was recorded.
In the second quarter of 2016, the Company sold the remaining portion of the Robinson Terminal real estate retained from the sale of the Publishing Subsidiaries, for a gain of $34.1 million.
In June 2016, GHG contributed assets to a joint venture entered into with a Michigan hospital in exchange for a 40% equity interest and other assets, resulting in a $3.2 million gain (see Note 3). The Company used an income and market approach to value the equity interest. The measurement of the equity interest in the joint venture is classified as a Level 3 fair value assessment due to the significance of unobservable inputs developed in the determination of the fair value.Megaphone.
In the first quarter of 2016, Kaplan sold Colloquy, which was part2019, the Company recorded a $29.0 million gain on the sale of Kaplan corporate and other, for a gain of $18.9 million.the Company’s interest in Gimlet Media.
110
16.ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)


17.    ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The other comprehensive income (loss) income consists of the following components:
Year Ended December 31, 2021
Before-TaxIncomeAfter-Tax
(in thousands)AmountTaxAmount
Foreign currency translation adjustments:
Translation adjustments arising during the year$(16,052)$ $(16,052)
Pension and other postretirement plans:
Actuarial gain519,595 (133,915)385,680 
Prior service cost(2)1 (1)
Amortization of net actuarial gain included in net income(5,486)1,414 (4,072)
Amortization of net prior service cost included in net income3,170 (817)2,353 
Settlement included in net income(120)30 (90)
517,157 (133,287)383,870 
Cash flow hedge:
Gain for the year349 (93)256 
Other Comprehensive Income$501,454 $(133,380)$368,074 
Year Ended December 31, 2020
Before-TaxIncomeAfter-Tax
(in thousands)AmountTaxAmount
Foreign currency translation adjustments:
Translation adjustments arising during the year$31,642 $— $31,642 
Pension and other postretirement plans:
Actuarial gain365,164 (98,594)266,570 
Prior service cost(69)19 (50)
Amortization of net actuarial loss included in net income1,219 (329)890 
Amortization of net prior service cost included in net income2,680 (724)1,956 
368,994 (99,628)269,366 
Cash flow hedges:
Loss for the year(1,282)293 (989)
Other Comprehensive Income$399,354 $(99,335)$300,019 
Year Ended December 31, 2019
Before-TaxIncomeAfter-Tax
(in thousands)AmountTaxAmount
Foreign currency translation adjustments:
Translation adjustments arising during the year$5,371 $— $5,371 
Adjustment for sale of a business with foreign operations2,011 — 2,011 
7,382 — 7,382 
Pension and other postretirement plans:
Actuarial gain231,104 (62,398)168,706 
Prior service cost(5,725)1,546 (4,179)
Amortization of net actuarial gain included in net income(2,046)552 (1,494)
Amortization of net prior service credit included in net income(4,142)1,118 (3,024)
Settlement included in net income(91,676)24,752 (66,924)
127,515 (34,430)93,085 
Cash flow hedges:
Loss for the year(1,344)343 (1,001)
Other Comprehensive Income$133,553 $(34,087)$99,466 
111


 Year Ended December 31, 2018
 Before-Tax Income After-Tax
(in thousands)Amount Tax Amount
Foreign currency translation adjustments:     
Translation adjustments arising during the year$(35,584) $
 $(35,584)
Pension and other postretirement plans:     
Actuarial loss(101,013) 27,273
 (73,740)
Prior service credit4,262
 (1,151) 3,111
Amortization of net actuarial gain included in net income(11,349) 3,064
 (8,285)
Amortization of net prior service credit included in net income(947) 256
 (691)
Curtailments and settlements included in net income(30,267) 8,172
 (22,095)
 (139,314) 37,614
 (101,700)
Cash flow hedge:     
Gain for the year551
 (104) 447
Other Comprehensive Loss$(174,347) $37,510
 $(136,837)


 Year Ended December 31, 2017
 Before-Tax Income After-Tax
(in thousands)Amount Tax Amount
Foreign currency translation adjustments:     
Translation adjustments arising during the year$33,175
 $
 $33,175
Adjustment for sale of a business with foreign operations137
 
 137
 33,312
 
 33,312
Unrealized gains on available-for-sale securities:     
Unrealized gains for the year112,086
 (44,834) 67,252
Pension and other postretirement plans:     
Actuarial gain179,674
 (48,511) 131,163
Prior service cost(75) 20
 (55)
Amortization of net actuarial gain included in net income(6,527) 2,612
 (3,915)
Amortization of net prior service cost included in net income477
 (191) 286
 173,549
 (46,070) 127,479
Cash flow hedge:     
Gain for the year112
 (19) 93
Other Comprehensive Income$319,059
 $(90,923) $228,136
 Year Ended December 31, 2016
 Before-Tax Income After-Tax
(in thousands)Amount Tax Amount
Foreign currency translation adjustments:     
Translation adjustments arising during the year$(22,149) $
 $(22,149)
Unrealized gains on available-for-sale securities:     
Unrealized gains for the year55,507
 (22,203) 33,304
Reclassification adjustment for realization of loss on sale of available-for-sale securities included in net income1,879
 (752) 1,127
 57,386
 (22,955) 34,431
Pension and other postretirement plans:     
Actuarial loss(133,915) 53,566
 (80,349)
Amortization of net actuarial loss included in net income1,157
 (463) 694
Amortization of net prior service cost included in net income419
 (167) 252
Curtailments and settlements included in net income(17,993) 7,197
 (10,796)
 (150,332) 60,133
 (90,199)
Cash flow hedge:     
Loss for the year(334) 57
 (277)
Other Comprehensive Loss$(115,429) $37,235
 $(78,194)


The accumulated balances related to each component of other comprehensive income (loss) are as follows:
(in thousands, net of taxes)
Cumulative
Foreign
Currency
Translation
Adjustment
 Unrealized Gain on Available-for-Sale Securities 
Unrealized Gain
on Pensions
and Other
Postretirement
Plans
 
Cash Flow
Hedge
 
Accumulated
Other
Comprehensive
Income
As of December 31, 2016$(26,998) $92,931
 $170,830
 $(277) $236,486
Other comprehensive income (loss) before reclassifications33,175
 67,252
 131,108
 (29) 231,506
Net amount reclassified from accumulated other comprehensive income137
 
 (3,629) 122
 (3,370)
Net other comprehensive income33,312
 67,252
 127,479
 93
 228,136
Reclassification of stranded tax effects to retained earnings as a result of tax reform
 34,706
 36,227
 
 70,933
As of December 31, 20176,314
 194,889
 334,536
 (184) 535,555
Reclassification of unrealized gains on available-for-sale securities to retained earnings as a result of adoption of new guidance
 (194,889) 
 
 (194,889)
Other comprehensive (loss) income before reclassifications(35,584) 
 (70,629) 579
 (105,634)
Net amount reclassified from accumulated other comprehensive income
 
 (31,071) (132) (31,203)
Net other comprehensive (loss) income(35,584) 
 (101,700) 447
 (136,837)
As of December 31, 2018$(29,270) $
 $232,836
 $263
 $203,829
(in thousands, net of taxes)Cumulative
Foreign
Currency
Translation
Adjustment
Unrealized Gain
on Pensions
and Other
Postretirement
Plans
Cash Flow
Hedges
Accumulated
Other
Comprehensive
Income
As of December 31, 2019$(21,888)$325,921 $(738)$303,295 
Other comprehensive income (loss) before reclassifications31,642 266,520 (1,476)296,686 
Net amount reclassified from accumulated other comprehensive income— 2,846 487 3,333 
Net other comprehensive income (loss)31,642 269,366 (989)300,019 
As of December 31, 20209,754 595,287 (1,727)603,314 
Other comprehensive income (loss) before reclassifications(16,052)385,679 (375)369,252 
Net amount reclassified from accumulated other comprehensive income (1,809)631 (1,178)
Net other comprehensive income (loss)(16,052)383,870 256 368,074 
As of December 31, 2021$(6,298)$979,157 $(1,471)$971,388 
The amounts and line items of reclassifications out of Accumulated Other Comprehensive Income (Loss) are as follows:
Year Ended December 31 Affected Line Item in the Consolidated Statements of OperationsYear Ended December 31Affected Line Item in the Consolidated Statements of Operations
(in thousands)2018 2017 2016 (in thousands)202120202019
Foreign Currency Translation Adjustments:      Foreign Currency Translation Adjustments:
Adjustment for sales of businesses with foreign operations$
 $137
 $
 Other income (expense), netAdjustment for sales of businesses with foreign operations$ $— $2,011 Other income, net
Unrealized Gains on Available-for-Sale Securities:      
Realized loss for the year
 
 1,879
 Other income (expense), net

 
 (752) Provision for (benefit from) income taxes

 
 1,127
 Net of tax
Pension and Other Postretirement Plans:      Pension and Other Postretirement Plans:
Amortization of net actuarial (gain) loss(11,349) (6,527) 1,157
 (1)Amortization of net actuarial (gain) loss(5,486)1,219 (2,046)(1)
Amortization of net prior service (credit) cost(947) 477
 419
 (1)
Curtailment and settlement gains(30,267) 
 (17,993) (1)
Amortization of net prior service cost (credit)Amortization of net prior service cost (credit)3,170 2,680 (4,142)(1)
Settlement gainsSettlement gains(120)— (91,676)(1)
(42,563) (6,050) (16,417) Before tax
11,492
 2,421
 6,567
 Provision for (benefit from) income taxes
(31,071) (3,629) (9,850) Net of tax(2,436)3,899 (97,864)Before tax
Cash Flow Hedge      
627 (1,053)26,422 Provision for income taxes
(1,809)2,846 (71,442)Net of tax
Cash Flow HedgesCash Flow Hedges
(163) 152
 16
 Interest expense631 474 (146)Interest expense
31
 (30) (3) Provision for (benefit from) income taxes 13 51 Provision for income taxes
(132) 122
 13
 Net of tax631 487 (95)Net of tax
Total reclassification for the year$(31,203) $(3,370) $(8,710) Net of taxTotal reclassification for the year$(1,178)$3,333 $(69,526)Net of tax
____________
(1)
(1)    These accumulated other comprehensive income components are included in the computation of net periodic pension and postretirement plan cost (see Note 14) and are included in non-operating pension and postretirement benefit income in the Company’s Consolidated Statements of Operations.


17.LEASES AND OTHER COMMITMENTS
The Company leases real property under operating agreements. Many of the leases contain renewal options and escalation clauses that require payments of additional rent to the extent of increases in the related operating costs.
At December 31, 2018, future minimum rental payments under noncancelable operating leases approximate the following:
(in thousands) 
2019$101,009
202084,945
202172,031
202253,709
202347,091
Thereafter115,948
 $474,733
Minimum payments have not been reduced by minimum sublease rentalscomputation of $66.0 million duenet periodic pension and postretirement plan cost (see Note 15) and are included in non-operating pension and postretirement benefit income in the future under noncancelable subleases.Company’s Consolidated Statements of Operations.
Rent expense under operating leases was approximately $83.4 million, $81.1 million and $86.9 million in 2018, 2017 and 2016, respectively. Sublease income was approximately $15.6 million, $14.8 million and $14.3 million in 2018, 2017 and 2016, respectively.
The Company’s broadcast subsidiaries are parties to certain agreements that commit them to purchase programming to be produced in future years. At December 31, 2018, such commitments amounted to approximately $16.1 million. If such programs are not produced, the Company’s commitment would expire without obligation.18.    CONTINGENCIES AND OTHER COMMITMENTS
18.CONTINGENCIES
Litigation, Legal and Other Matters.  The Company and its subsidiaries are subject to complaints and administrative proceedings and are defendants in various civil lawsuits that have arisen in the ordinary course of their businesses, including contract disputes; actions alleging negligence, libel, defamation and invasion of privacy; trademark, copyright and patent infringement; U.S. False Claims Act (False Claims Act) violations; violations of employment laws and applicable wage and hour laws; and statutory or common law claims involving current and former students and employees. Although the outcomes of the legal claims and proceedings against the Company cannot be predicted with certainty, based on currently available information, management believes that there are no existing claims or proceedings that are likely to have a material effect on the Company’s business, financial condition, results of operations or cash flows. However, based on currently available information, management believes it is reasonably possible that future losses from existing and threatened legal, regulatory and other proceedings in excess of the amounts recorded could reach approximately $45$15 million.
On February 6, 2008, a purported class-action lawsuit was filed in the U.S. District Court for the Central District of California by purchasers of BAR/BRI bar review courses, from July 2006 onward, alleging antitrust claims against Kaplan and West Publishing Corporation, BAR/BRI’s former owner. On April 10, 2008, the court granted defendants’ motion to dismiss, a decision that was reversed by the Ninth Circuit Court of Appeals on November 7, 2011. The Ninth Circuit also referred the matter to a mediator for the purpose of exploring a settlement. In the fourth quarter of 2012, the parties reached a comprehensive agreement to settle the matter. The settlement was approved by the District Court in September 2013. In the fourth quarter of 2017, the Ninth Circuit remanded to the District Court, which, once again, set attorneys’ fees on January 11, 2018. Distribution of settlement funds was made in December 2018 and the claims administration process has been completed.
During 2014, certain Kaplan subsidiaries were subject to unsealed cases filed by former employees that include, among other allegations, claims under the False Claims Act relating to eligibility for Title IV funding. The U.S. government declined to intervene in all cases, and, as previously reported, court decisions either dismissed the cases in their entirety or narrowed the scope of their allegations. The remaining case is captioned United States of America ex rel. Carlos Urquilla-Diaz et al. v. Kaplan University et al. (unsealed March 25, 2008). On August 17, 2011, the U.S. District Court for the Southern District of Florida issued a series of rulings in the Diaz case, which included three separate complaints: Diaz, Wilcox and Gillespie. The court dismissed the Wilcox complaint in its entirety; dismissed all False Claims Act allegations in the Diaz complaint, leaving only an individual employment claim; and dismissed in part the Gillespie complaint, thereby limiting the scope and time frame of its False Claims Act allegations regarding compliance with the U.S. Federal Rehabilitation Act. On October 31, 2012, the court entered summary judgment in favor of the Company as to the sole remaining employment claim in the Diaz complaint. On July 16, 2013, the court likewise entered summary judgment in favor of the Company on all remaining claims in the Gillespie complaint. Diaz and Gillespie each appealed to the U.S. Court of Appeals for the


Eleventh Judicial Circuit. Arguments on both appeals were heard on February 3, 2015. On March 11, 2015, the appellate court issued a decision affirming the lower court’s dismissal of all of Gillespie’s claims. The appellate court also dismissed three of the four Diaz claims, but reversed and remanded on Diaz’s claim that incentive compensation for admissions representatives was improperly based solely on enrollment counts. Kaplan filed an answer to Diaz’s amended complaint on September 11, 2015. Kaplan filed a motion to dismiss Diaz’s claims, and a hearing was held on December 17, 2015. On March 24, 2016, the Court denied the motion to dismiss. Discovery in the case closed in January 2017. Kaplan filed a motion for summary judgment on February 21, 2017. Summary judgment was granted in full and entered on July 13, 2017. Diaz filed a notice of appeal in September 2017 and filed his initial brief. Kaplan filed a response brief in the third quarter of 2018. The matter is not likely to be decided until mid-2019.
On October 19, 2018, a lawsuit was filed against KHE and other unrelated parties in El Paso, TX, County District Court alleging liability for default on a real property lease by Education Corporation of America. On November 19, 2018, this matter was removed to the U.S. District Court for the Western District of Texas. KHE’s responsive pleading was filed in January 2019. On September 3, 2015, Kaplan sold to ECA substantially all of the assets of KHE nationally accredited on-ground Title IV eligible schools (KHE Campuses). The transaction included the transferKHEC business to Education Corporation of certain real estate leases that were guaranteed by Kaplan. As part of the transaction, Kaplan retained liability for, among other things, obligations arising under certain lease guarantees. ECA is currently in receivership and has terminated all of its higher education operations other than the New England College of Business (NECB). The receiver has repudiated all of ECA’s real estate leases not connected to NECB. Although ECA is required to indemnify Kaplan for any amounts Kaplan must pay due to ECA’s failure to fulfill its obligations under real estate leases guaranteed by Kaplan, ECA’s financial situation and the existence of secured and unsecured creditors make it unlikely that Kaplan will recover from ECA. In the second half of 2018, the Company recorded an estimated $17.5 million in losses on guarantor lease obligations in connection with this transaction in other non-operating expense.
On March 28, 2016, a class-action lawsuit was filed in the U.S. District Court for the Northern District of Illinois by Erin Fries, a physical therapist formerly employed by Residential, against Residential Home Health, LLC, Residential Home Health Illinois, LLC, and David Curtis. The complaint alleges violations of the Fair Labor Standards Act and the Illinois minimum wage law. The complaint seeks damages, attorney’s fees and costs. At this time, the Company cannot predict the outcome of this matter. In August 2017, the Pennsylvania Department of Health cited Celtic Healthcare of Westmoreland, LLC for being out of compliance with four conditions of the Medicare Conditions of Participation between August 7, 2017, and September 6, 2017. Celtic Healthcare of Westmoreland, LLC d/b/a Allegheny Health Network Healthcare@Home Home Health (AHN H@H Home Health) is a wholly owned subsidiary of a joint venture between West Penn Allegheny Health System, Inc. and Celtic Healthcare, Inc. In light of this 31-day period of non-compliance, the Department of Health issued a provisional license for AHN H@H Home Health. Following a re-survey investigation by the Pennsylvania Department of Health, on January 12, 2018, the Department of Health removed the provisional license assigned to AHN H@H Home Health and restored its unrestricted license. The Pennsylvania Department of Health will alert the Centers for Medicare and Medicaid Services (CMS) about this matter. CMS has the authority to impose civil monetary penalties of up to $10,000 per day or per instance for non-compliance. At this time, the Company cannot predict the outcome of this matter.
Her Majesty’s Revenue and Customs (HMRC), a department of the U.K. government responsible for the collection of taxes, has raised assessments against the Kaplan U.K. Pathways business for Value Added Tax (VAT) relating to 2017 and earlier years, which have been paid by Kaplan. In September 2017, in a case captioned Kaplan International Colleges UK Limited v. The Commissioners for Her Majesty’s Revenue and Customs, Kaplan challenged these assessments. The Company believes it has met all requirements under U.K. VAT law and expects to recover the £15.4 million receivable related to the assessments and subsequent payments that have been paid. Following a hearing held in January 2019, before the First Tier Tax Tribunal, all issues related to EU law in the case were referred to the Court of Justice of the European Union. If the Company does not prevail in this case, a pre-tax charge of £15.4 million will be recorded to operating expense in the Company’s statement of operations.
In March 2018, HMRC issued new VAT guidance indicating a change of policy in relation to certain aspects of a cost sharing exemption that could impact the U.K. Pathways business adversely if this guidance were to become law. As of December 31, 2018, this guidance had not yet been incorporated into U.K. law. If Kaplan is not successful in preserving a valid exemption under U.K. VAT law, the U.K. Pathways business would incur additional VAT expense in the future. In a separate matter, there is presently a legal case awaiting judgment at the Supreme Court in the U.K. that may impact U.K. Pathways’ ability to receive the benefit of an exemption from charging its students VAT on tuition fees. The case may reverse or amend existing law and guidance that permits private providers to qualify as a “college of a university” and therefore, receive the benefit of an exemption from charging its students VAT on tuition fees. If the case restricts which businesses are capable of constituting “colleges of a university” and entitled to exemption, KI Pathways Colleges’ financial results may be adversely impacted if they are not able to meet any new requirements.


KHE Regulatory Environment. KHE no longer owns or operates KU or any other institution participating in student financial aid programs that have been created under Title IV of the U.S. Federal Higher Education Act of 1965 (Higher Education Act), as amended (Title IV). KHE is a service provider to Purdue Global and other Title IV participating institutions. As a service provider under the U.S. Department of Education (ED) regulations, KHE is required to comply with certain laws and regulations, including applicable statutory provisions of Title IV. KHE also provides financial aid services to Purdue Global, and as such, meets the definition of a “third-party servicer” contained in the Title IV regulations. By virtue of being a third-party servicer, KHE is also subject to applicable statutory provisions of Title IV and ED regulations that, among other things, require KHE to be jointly and severally liable with Purdue Global to the ED for any violation by Purdue Global of any Title IV statute or ED regulation or requirement. Pursuant to ED requirements, Purdue is responsible for any liability arising from the operation of the institution; however, pursuant to the agreement to transfer KU, KHE agreed to indemnify Purdue for certain pre-closing liabilities.
ED Program Reviews. The ED has undertaken program reviews at various KHE locations.
On February 23, 2015, the ED began a program review assessing KU’s administration of its Title IV and Higher Education Act programs during the 2013-2014 and 2014-2015 award years.America. In 2018, certain subsidiaries of Kaplan contributed the institutional assets and operations of KU to a new university: an Indiana nonprofit, public-benefit corporation affiliated with Purdue Global,University, known as Purdue University Global. Kaplan could be held liable to the current owners of KU and the university became Purdue Global, underKHEC schools related to the ownershippre-sale conduct of the schools, and controlthe pre-sale conduct of Purdue University. However,the schools has been and could be the subject of future compliance reviews, regulatory proceedings or lawsuits that could result in monetary liabilities or fines or other sanctions. On May 6, 2021, Kaplan retainsreceived a notice from the Department of Education (ED) that it would be conducting a fact-finding
112


process pursuant to the borrower defense to repayment (BDTR) regulations to determine the validity of more than 800 BDTR claims and a request for documents related to several of Kaplan’s previously owned schools. Beginning in July 2021, Kaplan started receiving the claims and related information requests. In total, Kaplan received 1,449 borrower defense applications that seek discharge of approximately $35 million in loans. Most claims received are from former KU students. The ED’s process for adjudicating these claims is subject to the borrower defense regulations but it is not clear to what extent the ED will exclude claims based on the underlying statutes of limitations, evidence provided by Kaplan, or any prior investigation related to schools attended by the student applicants. Kaplan believes it has defenses that would bar any student discharge or school liability including that the claims are barred by the applicable statute of limitations, unproven, incomplete and fail to meet regulatory filing requirements. Kaplan expects to vigorously defend any attempt by the ED to hold Kaplan liable for any financial obligationsultimate student discharges and is responding to all claims with documentary and narrative evidence to refute the ED might impose under this program reviewallegations, demonstrate their lack of merit, and thatsupport the denial of all such claims by the ED. If the claims are the result of actions taken during the time that Kaplan owned the institution. On September 28, 2018, the ED issued a Preliminary Program Report (Preliminary Report). This Preliminary Report is not final, andsuccessful, the ED may changeseek reimbursement for the findingsamount discharged from Kaplan. If the ED initiates a reimbursement action against Kaplan following approval of former students’ BDTR applications, Kaplan may be subject to significant liability.
In June 2021, the Committee for Private Education (CPE) in Singapore instructed Kaplan Singapore to cease new enrollments for 3 marketing diploma programs on both a full and part-time basis due to noncompliance with minimum entry level requirements for admission and to teach out existing students in these programs. On August 23, 2021, the CPE issued the same instructions with respect to the Kaplan Foundation diploma and 4 information technology diploma programs on both a full and part-time basis. In November 2021, the CPE issued the same instructions with respect to a further 23 full-time or part-time diploma programs. Post regulatory action, Kaplan Singapore is currently still able to offer 449 programs that are registered with the CPE, out of which there are 16 diplomas, 361 bachelors and the balance of which are certificate and postgraduate courses. Kaplan Singapore will apply for re-registration of diploma programs in 2022. The impact from regulatory actions by the CPE will have a significant adverse impact on Kaplan Singapore’s revenues, operating results and cash flows in the final report. Nonefuture. No assurance can be given that applications for re-registration of the initial findings in the Preliminary Report carries material financial liability. Although the program review technically covers only the 2013–2015 award years, the ED included a review of the treatment of student financial aid refunds for students who withdrew from a program prior to completion in 2017–2018. KHE cannot predict the outcome of this review, when itimpacted programs will be completed, whether any final findings of non-compliance with financial aid programsuccessful. An inability to re-register one or other requirements will impact KHE’s operations, or what liability or other limitations the ED might place on KHE or Purdue Global as a result of this review.
There are also two open program reviews at campuses that were part of the KHE Campuses business prior to its sale in 2015 to ECA. The ED’s final reports on the program reviews at former KHE Broomall, PA, and Pittsburgh, PA, locations are pending. KHE retains responsibility for any financial obligations resulting from these program reviews.
The Company does not expect the open program reviews tomore impacted programs could have a further material impactadverse effect on KHE; however,Kaplan Singapore’s revenues, operating results and cash flows.
Other Commitments. The Company’s broadcast subsidiaries are parties to certain agreements that commit them to purchase programming to be produced in future years. At December 31, 2021, such commitments amounted to approximately $14.2 million. If such programs are not produced, the results of open program reviews and their impact on Kaplan’s operations are uncertain.Company’s commitment would expire without obligation.
19.BUSINESS SEGMENTS
19.    BUSINESS SEGMENTS
Basis of Presentation. The Company’s organizational structure is based on a number of factors that management uses to evaluate, view and run its business operations, which include, but are not limited to, customers, the nature of products and services and use of resources. The business segments disclosed in the Consolidated Financial Statements are based on this organizational structure and information reviewed by the Company’s management to evaluate the business segment results.The
To meet the quantitative threshold related to revenue required for separate disclosure, the Company has sixchanged the presentation of its segments in the third quarter of 2021 into the following 7 reportable segments: Kaplan International, KHE, KTP, Professional (U.S.), television broadcastingKaplan Higher Education, Kaplan Supplemental Education, Television Broadcasting, Manufacturing, Healthcare and healthcare.Automotive. Segment operating results have been restated to reflect this change.
The Company evaluates segment performance based on operating income before amortization of intangible assets and impairment of goodwill and other long-lived assets. The accounting policies at the segments are the same as described in Note 2. In computing operating income from operationsbefore amortization by segment, the effects of amortization of intangible assets, impairment of goodwill and other long-lived assets, equity in earnings (losses) of affiliates, interest income, interest expense, non-operating pension and postretirement benefit income, other non-operating income and expense items and income taxes are not included.excluded. Intersegment sales are not material.
Identifiable assets by segment are those assets used in the Company’s operations in each business segment.The Prepaid Pensioninvestments in marketable equity securities and affiliates, and prepaid pension cost isare not included in identifiable assets by segment.Investments in marketable equity securities are discussed in Note 4.  
Education. Education products and services are provided by Kaplan, Inc. Kaplan International includes professional training and postsecondary education businesses largely outside the United States,U.S., as well as English-language programs. Prior to the KU Transaction closing on March 22, 2018, KHE included Kaplan’s domestic postsecondary education business, made up of fixed-facility colleges and online postsecondary and career programs. Following the KU Transaction closing, KHE includes the results as a service provider to higher education institutions. KTPSupplemental Education includes Kaplan’s standardized test preparation, and new economy skills training programs. Professional (U.S.) includes the domestic professional training and other continuing education businesses.

As of December 31, 2021, Kaplan had a total outstanding accounts receivable balance of $97.4 million from Purdue Global related to amounts due for reimbursements for services, fees earned and a deferred fee. Included in this

113


In recent years,total, Kaplan has formulated and implemented restructuring plansa $19.2 million long-term receivable balance due from Purdue Global at its various businesses. There were no significant restructuring costs in 2018. Across all Kaplan businesses, restructuring costsDecember 31, 2021, related to the advance of $9.1$20.0 million and $11.9 million were recorded in 2017 and 2016, respectively, as follows:
during the initial KU Transaction.
 Year Ended December 31
(in thousands)2017 2016
Accelerated depreciation$339
 $1,815
Lease obligation losses
 2,694
Severance6,099
 5,902
Other2,627
 1,441
 $9,065
 $11,852
Kaplan International incurred restructuring costs of $2.9 millionand $4.7 million in 2017 and 2016, respectively. These restructuring costs were largely in the U.K. and Australia and included severance charges, lease obligations, and accelerated depreciation.
KHE incurred restructuring costs of $1.4 million and $7.1 million in 2017 and 2016, respectively, primarily from severance, lease obligation losses and accelerated depreciation.
KTP incurred restructuring costs of $4.3 million in 2017 primarily from severance.
Total accrued restructuring costs at Kaplan were $4.6 million and $8.5 million at the end of 2018 and 2017, respectively.
Television Broadcasting. Television broadcasting operations are conducted through seven7 television stations serving the Detroit, Houston, San Antonio, Orlando, Jacksonville and Roanoke television markets. All stations are network-affiliated (except for WJXT in Jacksonville), with revenues derived primarily from sales of advertising time. In addition, the stations generate revenue from retransmission consent agreements for the right to carry their signals.
Healthcare. Graham Healthcare Group provides home health and hospice services.
Other Businesses. Other businesses includes the following:
Manufacturing. Manufacturing operations includeHoover, a Thomson, GA-based supplier of pressure impregnated kiln-dried lumber and plywood products for fire retardant and preservative applications (acquired in April 2017);application; Dekko, a Garrett, IN-based manufacturer of electrical workspace solutions, architectural lighting, and electrical components and assemblies; Joyce/Dayton Corp., a Dayton, OH-based manufacturer of screw jacks and other linear motion systems; and Forney, a global supplier of products and systems that control and monitor combustion processes in electric utility and industrial applications;applications.
SocialCode,Healthcare. Graham Healthcare Group provides home health, hospice and palliative services. GHG also provides other healthcare services, including nursing care and prescription services for patients receiving in-home infusion treatments.
Automotive. Automotive includes 4 automotive dealerships in the Washington, D.C. metropolitan area, including Lexus of Rockville, Honda of Tysons Corner, Jeep of Bethesda and Ford of Manassas, which was acquired in December 2021.
Other Businesses. Other businesses includes the following:
Leaf Group, a consumer internet company, which was acquired in June 2021.
Clyde’s Restaurant Group owns and operates 11 restaurants and entertainment venues in the Washington, D.C. metropolitan area.
Code3 is a marketing and insights company that manages digital advertising for leading brands; campaigns.
Framebridge, a custom framing service company, which was acquired in May 2020.
The Slate Group and Foreign Policy Group, which publish online and print magazines and websites; and threefour investment stage businesses, Panoply,CyberVista, Decile, Pinna and CyberVista.City Cast. Other businesses also includes Megaphone, which was sold in December 2020.
Corporate Office. Corporate office includes the expenses of the Company’s corporate office, a netdefined benefit pension creditexpense, and certain continuing obligations related to prior business dispositions.
Geographical Information. The Company’s non-U.S. revenues in 2018, 20172021, 2020 and 20162019 totaled approximately $657$709 million $637, $642 million and $624$691 million, respectively, primarily from Kaplan’s operations outside the U.S. Additionally, revenues in 2018, 20172021, 2020 and 20162019 totaled approximately $345$404 million, $320$375 million, and $312$384 million, respectively, from Kaplan’s operations in the U.K. The Company’s long-lived assets in non-U.S. countries (excluding goodwill and other intangible assets), totaled approximately $124 $476 million and $89$442 million at December 31, 20182021 and 2017,2020, respectively.

Restructuring. During 2020,Kaplan developed and implemented a number of initiatives across its businesses to help mitigate the negative revenue impact arising from COVID-19 and to re-align its program offerings to better pursue opportunities from the disruption. These initiatives include employee salary and work-hour reductions; temporary furlough and other employee reductions; reduced discretionary spending; facility restructuring to reduce its classroom and office facilities; reduced capital expenditures; and accelerated development and promotion of various online programs and solutions.

In 2020, Kaplan recorded restructuring costs related to severance, the exit of classroom and office facilities, and approved Separation Incentive Programs that reduced the number of employees at all of Kaplan’s divisions.
In 2020, Code3 and Decile recorded restructuring costs in connection with a restructuring plan that included the exit of an office facility, an approved Separation Incentive Program to reduce the number of employees, and other cost reduction initiatives to mitigate the adverse impact of COVID-19 on advertising demand.
114


Restructuring related costs across all businesses in 2020 were recorded as follows:
(in thousands)Kaplan InternationalHigher EducationSupplemental EducationKaplan CorporateTotal EducationOther BusinessesTotal
Severance$4,366 $— $1,797 $— $6,163 $ $6,163 
Facility related costs:
Operating lease cost2,905 3,451 3,586 — 9,942  9,942 
Accelerated depreciation of property, plant and equipment1,620 152 1,801 — 3,573  3,573 
Total Restructuring Costs Included in Segment Income (Loss) from Operations (1)
$8,891 $3,603 $7,184 $ $19,678 $ $19,678 
Impairment of other long-lived assets:
Lease right-of-use assets$3,976 $2,062 $4,005 $— $10,043 $1,405 $11,448 
Property, plant and equipment1,248 174 813 — 2,235 86 2,321 
Non-operating pension and postretirement benefit income, net1,100 2,233 8,566 883 12,782 999 13,781 
Total Restructuring Related Costs$15,215 $8,072 $20,568 $883 $44,738 $2,490 $47,228 
(1)    These amounts are included in the segments’ Income (Loss) from Operations before Amortization of Intangible Assets and Impairment of Goodwill and Other Long-Lived Assets.
Total accrued restructuring costs at Kaplan were $1.2 million and $4.7 million as of December 31, 2021 and 2020, respectively.
In June 2020, CRG made the decision to close its restaurant and entertainment venue in Columbia, MD effective July 19, 2020 and recorded accelerated depreciation of property, plant and equipment totaling $5.7 million for the year ended December 31, 2020.
115


Company information broken down by operating segment and education division:
Year Ended December 31
(in thousands)202120202019
Operating Revenues   
Education$1,361,245 $1,305,713 $1,451,750 
Television broadcasting494,177 525,212 463,464 
Manufacturing458,125 416,137 449,053 
Healthcare223,030 198,196 161,768 
Automotive327,069 258,144 236,319 
Other businesses324,353 187,347 170,412 
Corporate office — — 
Intersegment elimination(2,025)(1,628)(667)
 $3,185,974 $2,889,121 $2,932,099 
Income (Loss) from Operations before Amortization of Intangible Assets and Impairment of Goodwill and Other Long-Lived Assets
Education$69,892 $41,056 $63,680 
Television broadcasting154,862 199,938 166,076 
Manufacturing36,926 40,427 46,809 
Healthcare29,912 30,327 14,319 
Automotive11,771 502 531 
Other businesses(76,153)(72,915)(33,317)
Corporate office(59,025)(51,978)(51,157)
$168,185 $187,357 $206,941 
Amortization of Intangible Assets and Impairment of Goodwill and Other Long-Lived Assets
Education$19,319 $29,452 $15,608 
Television broadcasting5,440 5,440 13,408 
Manufacturing52,974 28,099 26,342 
Healthcare3,106 4,220 6,411 
Automotive 6,698 — 
Other businesses9,971 13,041 626 
Corporate office — — 
 $90,810 $86,950 $62,395 
Income (Loss) from Operations
Education$50,573 $11,604 $48,072 
Television broadcasting149,422 194,498 152,668 
Manufacturing(16,048)12,328 20,467 
Healthcare26,806 26,107 7,908 
Automotive11,771 (6,196)531 
Other businesses(86,124)(85,956)(33,943)
Corporate office(59,025)(51,978)(51,157)
 $77,375 $100,407 $144,546 
Equity in Earnings of Affiliates, Net17,914 6,664 11,664 
Interest Expense, Net(30,534)(34,439)(23,628)
Non-Operating Pension and Postretirement Benefit Income, Net109,230 59,315 162,798 
Gain on Marketable Equity Securities, net243,088 60,787 98,668 
Other Income, Net32,554 214,534 32,431 
Income Before Income Taxes$449,627 $407,268 $426,479 
116


Year Ended December 31Year Ended December 31
(in thousands)2018 2017 2016(in thousands)202120202019
Operating Revenues     
Education$1,451,015
 $1,516,776
 $1,598,461
Television broadcasting505,549
 409,916
 409,718
Healthcare149,275
 154,202
 146,962
Other businesses590,227
 511,003
 326,888
Corporate office
 
 
Intersegment elimination(100) (51) (139)
$2,695,966
 $2,591,846
 $2,481,890
Income (Loss) from Operations     
Education$97,136
 $77,687
 $95,321
Television broadcasting210,533
 139,258
 202,863
Healthcare(8,401) (2,569) 2,799
Other businesses(246) (19,263) (24,901)
Corporate office(52,861) (58,710) (53,213)
$246,161
 $136,403
 $222,869
Equity in Earnings (Losses) of Affiliates, Net14,473
 (3,249) (7,937)
Interest Expense, Net(32,549) (27,305) (32,297)
Debt Extinguishment Costs(11,378) 
 
Non-Operating Pension and Postretirement Benefit Income, Net120,541
 72,699
 80,665
Loss on Marketable Equity Securities, net(15,843) 
 
Other Income (Expense), Net2,103
 4,241
 (12,642)
Income Before Income Taxes$323,508
 $182,789
 $250,658
Depreciation of Property, Plant and Equipment     Depreciation of Property, Plant and Equipment   
Education$28,099
 $32,906
 $41,187
Education$32,113 $31,759 $25,655 
Television broadcasting13,204
 12,179
 9,942
Television broadcasting14,018 13,830 12,817 
ManufacturingManufacturing9,808 10,333 10,036 
Healthcare2,577
 4,583
 2,805
Healthcare1,313 1,665 2,314 
Other businesses11,835
 11,723
 9,570
Corporate office1,007
 1,118
 1,116
$56,722
 $62,509
 $64,620
Amortization of Intangible Assets and Impairment of Goodwill and     
Other Long-Lived Assets      
Education$9,362
 $5,162
 $7,516
Television broadcasting5,632
 6,349
 251
Healthcare14,855
 7,905
 6,701
AutomotiveAutomotive2,156 2,017 2,180 
Other businesses25,674
 31,385
 13,806
Other businesses11,376 13,947 5,376 
Corporate office
 
 
Corporate office631 706 875 
$55,523
 $50,801
 $28,274
$71,415 $74,257 $59,253 
Pension Service Cost     Pension Service Cost   
Education$8,753
 $9,720
 $11,803
Education$9,357 $10,024 $10,385 
Television broadcasting2,188
 1,942
 1,714
Television broadcasting3,575 3,263 3,025 
ManufacturingManufacturing1,282 1,424 80 
Healthcare573
 665
 
Healthcare561 543 492 
AutomotiveAutomotive — — 
Other businesses1,373
 1,125
 1,118
Other businesses1,755 1,698 1,640 
Corporate office5,334
 5,235
 5,826
Corporate office6,461 5,704 4,800 
$18,221
 $18,687
 $20,461
$22,991 $22,656 $20,422 
Capital Expenditures     Capital Expenditures   
Education$54,159
 $27,520
 $26,497
Education$100,780 $33,553 $57,246 
Television broadcasting27,013
 16,802
 27,453
Television broadcasting6,803 13,470 19,362 
ManufacturingManufacturing7,190 8,034 11,218 
Healthcare1,741
 2,987
 2,954
Healthcare3,671 2,481 2,303 
AutomotiveAutomotive31,124 3,181 1,402 
Other businesses15,154
 9,771
 13,093
Other businesses13,176 5,075 2,301 
Corporate office
 
 715
Corporate office25 80 115 
$98,067
 $57,080
 $70,712
$162,769 $65,874 $93,947 


Asset information for the Company’s business segments is as follows:
 As of December 31
(in thousands)20212020
Identifiable Assets  
Education$2,026,782 $1,975,104 
Television broadcasting448,627 453,988 
Manufacturing486,304 551,611 
Healthcare194,823 160,654 
Automotive238,200 151,789 
Other businesses689,872 365,744 
Corporate office68,962 348,045 
 $4,153,570 $4,006,935 
Investments in Marketable Equity Securities809,997 573,102 
Investments in Affiliates155,444 155,777 
Prepaid Pension Cost2,306,514 1,708,305 
Total Assets$7,425,525 $6,444,119 
117


 As of December 31
(in thousands)2018 2017
Identifiable Assets   
Education$1,568,747
 $1,592,097
Television broadcasting452,853
 455,884
Healthcare108,596
 129,856
Other businesses827,113
 855,399
Corporate office162,971
 182,905
 $3,120,280
 $3,216,141
Investments in Marketable Equity Securities496,390
 536,315
Investments in Affiliates143,813
 128,590
Prepaid Pension Cost1,003,558
 1,056,777
Total Assets$4,764,041
 $4,937,823
The Company’s education division comprises the following operating segments:
Year Ended December 31Year Ended December 31
(in thousands)2018 2017 2016(in thousands)202120202019
Operating Revenues     Operating Revenues   
Kaplan international$719,982
 $697,999
 $696,362
Kaplan international$726,875 $653,892 $750,245 
Higher education342,085
 431,425
 501,784
Higher education317,854 316,095 305,672 
Test preparation256,102
 273,298
 286,556
Professional (U.S.)134,187
 115,839
 115,263
Supplemental educationSupplemental education309,069 327,087 388,814 
Kaplan corporate and other1,142
 294
 214
Kaplan corporate and other14,759 12,643 9,480 
Intersegment elimination(2,483) (2,079) (1,718)Intersegment elimination(7,312)(4,004)(2,461)
$1,451,015
 $1,516,776
 $1,598,461
$1,361,245 $1,305,713 $1,451,750 
Income (Loss) from Operations before Amortization of Intangible Assets and Impairment of Long-Lived AssetsIncome (Loss) from Operations before Amortization of Intangible Assets and Impairment of Long-Lived Assets
Kaplan internationalKaplan international$33,457 $15,248 $42,129 
Higher educationHigher education24,134 24,364 13,960 
Supplemental educationSupplemental education36,919 19,705 34,487 
Kaplan corporate and otherKaplan corporate and other(24,715)(18,266)(26,891)
Intersegment eliminationIntersegment elimination97 (5)
$69,892 $41,056 $63,680 
Amortization of Intangible AssetsAmortization of Intangible Assets$16,001 $17,174 $14,915 
Impairment of Long-Lived AssetsImpairment of Long-Lived Assets$3,318 $12,278 $693 
Income (Loss) from Operations 
  
  
Income (Loss) from Operations   
Kaplan international$70,315
 $51,623
 $48,398
Kaplan international$33,457 $15,248 $42,129 
Higher education15,217
 16,719
 39,196
Higher education24,134 24,364 13,960 
Test preparation19,096
 11,507
 9,599
Professional (U.S.)28,608
 27,558
 27,436
Supplemental educationSupplemental education36,919 19,705 34,487 
Kaplan corporate and other(36,064) (29,863) (29,279)Kaplan corporate and other(44,034)(47,718)(42,499)
Intersegment elimination(36) 143
 (29)Intersegment elimination97 (5)
$97,136
 $77,687
 $95,321
$50,573 $11,604 $48,072 
Depreciation of Property, Plant and Equipment     Depreciation of Property, Plant and Equipment   
Kaplan international$15,755
 $14,892
 $17,523
Kaplan international$21,472 $19,562 $15,394 
Higher education4,826
 9,117
 13,816
Higher education3,658 3,082 2,883 
Test preparation3,941
 5,286
 6,287
Professional (U.S.)3,096
 3,041
 3,006
Supplemental educationSupplemental education6,544 8,724 7,132 
Kaplan corporate and other481
 570
 555
Kaplan corporate and other439 391 246 
$28,099
 $32,906
 $41,187
$32,113 $31,759 $25,655 
Amortization of Intangible Assets$9,362
 $5,162
 $7,516
Pension Service Cost     Pension Service Cost   
Kaplan international$298
 $264
 $268
Kaplan international$291 $433 $454 
Higher education4,310
 5,269
 6,544
Higher education4,440 4,150 4,535 
Test preparation2,611
 2,755
 3,072
Professional (U.S.)1,162
 913
 1,076
Supplemental educationSupplemental education3,814 4,207 4,734 
Kaplan corporate and other372
 519
 843
Kaplan corporate and other812 1,234 662 
$8,753
 $9,720
 $11,803
$9,357 $10,024 $10,385 
Capital Expenditures 
  
  
Capital Expenditures   
Kaplan international$44,469
 $21,667
 $16,252
Kaplan international$92,532 $24,085 $48,362 
Higher education4,045
 2,158
��3,140
Higher education3,629 3,234 3,463 
Test preparation681
 1,038
 4,672
Professional (U.S.)4,845
 2,475
 2,224
Supplemental educationSupplemental education4,297 6,030 5,362 
Kaplan corporate and other119
 182
 209
Kaplan corporate and other322 204 59 
$54,159
 $27,520
 $26,497
$100,780 $33,553 $57,246 


Asset information for the Company’s education division is as follows:
 As of December 31
(in thousands)2018 2017
Identifiable Assets   
Kaplan international$1,101,040
 $1,115,919
Higher education126,752
 231,986
Test preparation145,308
 130,938
Professional (U.S.)166,916
 91,630
Kaplan corporate and other28,731
 21,624
 $1,568,747
 $1,592,097
20.SUMMARY OF QUARTERLY OPERATING RESULTS AND COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
Quarterly results of operations and comprehensive income (loss) for the year ended December 31, 2018, is as follows:
(in thousands, except per share amounts)
First
Quarter
 Second Quarter 
Third
Quarter
 
Fourth
Quarter
Operating Revenues$659,436
 $672,677
 $674,766
 $689,087
Operating Costs and Expenses       
Operating365,151
 440,655
 448,920
 432,706
Selling, general and administrative225,045
 141,378
 131,081
 152,624
Depreciation of property, plant and equipment14,642
 13,619
 13,648
 14,813
Amortization of intangible assets10,384
 11,399
 12,269
 13,362
Impairment of goodwill and other long-lived assets
 
 8,109
 
 615,222
 607,051
 614,027
 613,505
Income from Operations44,214
 65,626
 60,739
 75,582
Equity in earnings of affiliates, net2,579
 931
 9,537
 1,426
Interest income1,372
 1,901
 611
 1,469
Interest expense(8,071) (17,165) (6,135) (6,531)
Debt extinguishment costs
 (11,378) 
 
Non-operating pension and postretirement benefit income, net21,386
 23,041
 22,214
 53,900
(Loss) gain on marketable equity securities, net(14,102) (2,554) 44,962
 (44,149)
Other income (expense), net9,187
 2,333
 3,142
 (12,559)
Income Before Income Taxes56,565
 62,735
 135,070
 69,138
Provision for Income Taxes13,600
 16,100
 10,000
 12,400
Net Income42,965
 46,635
 125,070
 56,738
Net Income Attributable to Noncontrolling Interests(74) (69) (6) (53)
Net Income Attributable to Graham Holdings Company Common Stockholders$42,891
 $46,566
 $125,064
 $56,685
Quarterly Comprehensive Income (Loss)$53,703
 $13,345
 $119,862
 $(52,541)
        
Per Share Information Attributable to Graham Holdings Company Common Stockholders       
Basic net income per common share$7.84
 $8.69
 $23.43
 $10.69
Basic average number of common shares outstanding5,436
 5,325
 5,302
 5,270
Diluted net income per common share$7.78
 $8.63
 $23.28
 $10.61
Diluted average number of common shares outstanding5,473
 5,362
 5,337
 5,309
The sum of the four quarters may not necessarily be equal to the annual amounts reported in the Consolidated Statements of Operations due to rounding.


Quarterly results of operations and comprehensive income for the year ended December 31, 2017, is as follows:
 As of December 31
(in thousands)20212020
Identifiable Assets
Kaplan international$1,493,868 $1,455,722 
Higher education187,789 187,123 
Supplemental education286,877 274,687 
Kaplan corporate and other58,248 57,572 
 $2,026,782 $1,975,104 
118
(in thousands, except per share amounts)
First
Quarter
 
Second
Quarter
 
Third
Quarter
 
Fourth
Quarter
Operating Revenues$582,717
 $676,087
 $657,225
 $675,817
Operating Costs and Expenses       
Operating325,687
 381,747
 374,987
 371,922
Selling, general and administrative225,289
 208,973
 228,051
 225,477
Depreciation of property, plant and equipment14,652
 15,871
 16,002
 15,984
Amortization of intangible assets6,836
 10,531
 10,923
 12,897
Impairment of goodwill and other long-lived assets
 9,224
 312
 78
 572,464
 626,346
 630,275
 626,358
Income from Operations10,253
 49,741
 26,950
 49,459
Equity in earnings (losses) of affiliates, net649
 1,331
 (532) (4,697)
Interest income1,363
 1,173
 861
 3,184
Interest expense(8,129) (9,035) (8,619) (8,103)
Non-operating pension and postretirement benefit income, net18,801
 18,620
 17,621
 17,657
Other income (expense), net849
 4,069
 1,963
 (2,640)
Income Before Income Taxes23,786
 65,899
 38,244
 54,860
Provision for (Benefit From) Income Taxes2,700
 23,900
 13,400
 (159,700)
Net Income21,086
 41,999
 24,844
 214,560
Net Income Attributable to Noncontrolling Interests
 (3) (60) (382)
Net Income Attributable to Graham Holdings Company Common Stockholders$21,086
 $41,996
 $24,784
 $214,178
Quarterly Comprehensive Income$39,368
 $59,135
 $64,029
 $367,648
        
Per Share Information Attributable to Graham Holdings Company Common Stockholders       
Basic net income per common share$3.77
 $7.51
 $4.45
 $38.76
Basic average number of common shares outstanding5,535
 5,539
 5,518
 5,473
Diluted net income per common share$3.75
 $7.46
 $4.42
 $38.52
Diluted average number of common shares outstanding5,569
 5,577
 5,554
 5,509
The sum of the four quarters may not necessarily be equal to the annual amounts reported in the Consolidated Statements of Operations due to rounding.

In the fourth quarter of 2017, an unfavorable $2.8 million net out of period expense adjustment was included that related to prior periods from the third quarter of 2016 through the third quarter of 2017. With respect to this error, the Company has concluded that it was not material to the Company’s financial position or results of operations for 2017 and 2016 and related interim periods, based on its consideration of quantitative and qualitative factors.


Quarterly impact from certain items in 2018 and 2017 (after-tax and diluted EPS amounts):
  
First
Quarter
 
Second
Quarter
 
Third
Quarter
 
Fourth
Quarter
2018       
ŸIntangible asset impairment charge of $5.8 million at the healthcare business    $(1.08)  
ŸA $3.0 million reduction to operating expenses from property, plant, and equipment gains in connection with the spectrum repacking mandate of the FCC ($0.2 million, $0.6 million, $0.8 million and $1.4 million in the first, second, third and fourth quarters, respectively)$0.04
 $0.11
 $0.14
 $0.26
ŸInterest expense of $6.2 million related to the settlement of a mandatorily redeemable noncontrolling interest  $(1.14)    
ŸDebt extinguishment costs of $8.6 million  $(1.60)    
ŸA $22.2 million settlement gain related to a bulk lump sum pension offering and curtailment gain related to changes in the Company’s postretirement healthcare benefit plan      $4.11
ŸLosses, net, of $12.6 million on marketable equity securities ($10.7 million loss, $1.9 million loss, $33.6 million gain, and $33.6 million loss in the first, second, third and fourth quarters, respectively)$(1.94) $(0.36) $6.26
 $(6.28)
ŸNon-operating gain, net, of $5.7 million from sales, write-ups and impairments of cost method and equity method investments, and related to sales of land and businesses, including losses on guarantor lease obligations ($3.6 million gain, $1.8 million gain, $8.0 million gain, and $7.7 million loss in the first, second, third and fourth quarters, respectively)$0.65
 $0.34
 $1.48
 $(1.43)
ŸGain of $1.8 million on the Kaplan University Transaction$0.33
      
ŸLosses, net, of $2.9 million for non-operating foreign currency (losses) gains ($0.1 million gain, $1.7 million loss, $0.1 million loss, and $1.2 million loss in the first, second, third and fourth quarters, respectively)$0.02
 $(0.32) $(0.02) $(0.23)
ŸA nonrecurring discrete $17.8 million deferred state tax benefit related to the release of valuation allowances    $3.31
  
ŸIncome tax benefit of $1.8 million related to stock compensation$0.33
      
2017       
ŸCharges of $6.3 million related to restructuring and non-operating Separation Incentive Program charges at the education division ($0.3 million, $0.4 million, $1.1 million and $4.5 million in the first, second, third and fourth quarters, respectively)$(0.05) $(0.06) $(0.20) $(0.81)
ŸGoodwill and long-lived assets impairment charges of $5.8 million at other businesses  $(1.03)    
ŸGains, net, of $2.1 million for non-operating foreign currency gains (losses) ($1.1 million gain, $2.2 million gain, $0.9 million gain and $2.1 million loss in the first, second, third and fourth quarters, respectively)$0.19
 $0.39
 $0.16
 $(0.37)
ŸNet deferred tax benefits of $177.5 million related to the Tax Act      $31.68
ŸIncome tax benefit of $5.9 million related to stock compensation$1.06
      


GRAHAM HOLDINGS COMPANY
FIVE-YEAR SUMMARY OF SELECTED HISTORICAL FINANCIAL DATA
See Notes to Consolidated Financial Statements for the summary of significant accounting policies and additional information relative to the years 2016–2018.
(in thousands, except per share amounts)2018 2017 2016 2015 2014
Results of Operations         
Operating revenues$2,695,966
 $2,591,846
 $2,481,890
 $2,586,114
 $2,737,032
Income (loss) from operations246,161
 136,403
 222,869
 (158,140) 149,402
Income (loss) from continuing operations271,408
 302,489
 169,458
 (141,390) 765,403
Net income (loss) attributable to Graham Holdings Company
common stockholders
271,206
 302,044
 168,590
 (101,286) 1,292,996
Per Share Amounts         
Basic earnings (loss) per common share attributable to Graham Holdings Company common stockholders         
Income (loss) from continuing operations$50.55
 $54.24
 $29.95
 $(25.23) $115.88
Net income (loss)50.55
 54.24
 29.95
 (17.87) 195.81
Diluted earnings (loss) per common share attributable to Graham Holdings Company common stockholders         
Income (loss) from continuing operations$50.20
 $53.89
 $29.80
 $(25.23) $115.40
Net income (loss)50.20
 53.89
 29.80
 (17.87) 195.03
Weighted average shares outstanding:         
Basic5,333
 5,516
 5,559
 5,727
 6,470
Diluted5,370
 5,552
 5,589
 5,727
 6,559
Cash dividends per common share$5.32
 $5.08
 $4.84
 $9.10
 $10.20
Graham Holdings Company common stockholders’ equity per common share$550.24
 $529.59
 $439.88
 $429.15
 $541.54
Financial Position         
Working capital$720,180
 $857,192
 $1,052,385
 $1,135,573
 $639,911
Total assets4,764,041
 4,937,823
 4,432,670
 4,352,825
 5,752,319
Long-term debt470,777
 486,561
 485,719
 399,800
 399,545
Graham Holdings Company common stockholders’ equity2,916,782
 2,915,145
 2,452,941
 2,490,698
 3,140,299
Impact from certain items included in income from continuing operations (after-tax and diluted EPS amounts): 
2018
Intangible asset impairment charge of $5.8 million ($1.08 per share) at the healthcare business
• Reduction to operating expenses of $3.0 million ($0.55 per share) from property, plant, and equipment gains in connection with the spectrum repacking mandate of the FCC
• Interest expense of $6.2 million ($1.14 per share) related to the settlement of a mandatorily redeemable noncontrolling interest
• Debt extinguishment costs of $8.6 million ($1.60 per share)
• Non-operating settlement and curtailment gain of $22.2 million ($4.11 per share) related to a bulk lump sum pension offering and changes in the Company’s postretirement healthcare benefit plan
• Losses, net, of $12.6 million ($2.33 per share) on marketable equity securities
• Non-operating gain, net, of $5.7 million ($1.03 per share) from sales, write-ups and impairments of cost method and equity method investments, and related to sales of land and businesses, including losses on guarantor lease obligations
• Gain of $1.8 million ($0.33 per share) on the Kaplan University Transaction
• Losses, net, of $2.9 million ($0.54 per share) from non-operating foreign currency losses
• Nonrecurring discrete deferred state tax benefit of $17.8 million ($3.31 per share) related to the release of valuation allowances
• Income tax benefit of $1.8 million ($0.33 per share) related to stock compensation
2017
Charges of $6.3 million ($1.12 per share) related to restructuring and non-operating Separation Incentive Program charges at the education division
Goodwill and other long-lived assets impairment charges of $5.8 million ($1.03 per share) in other businesses
Gains, net, of $2.1 million ($0.37 per share) from non-operating foreign currency gains
Net deferred tax benefits of $177.5 million ($31.68 per share) related to the Tax Act
Income tax benefit of $5.9 million ($1.06 per share) related to stock compensation
2016
Charges of $7.7 million ($1.36 per share) related to restructuring at the education division
Non-operating settlement gain of $10.8 million ($1.92 per share) related to a bulk lump sum pension offering
$20.0 million ($3.52 per share) net non-operating gain from the sales of land and marketable equity securities
$13.6 million ($2.37 per share) non-operating gain arising from the sale of a business and the formation of a joint venture
$24.1 million ($4.27 per share) non-operating expense from the write-down of cost method investments and investments in affiliates
Losses, net, of $25.5 million ($4.51 per share) from non-operating foreign currency losses
Net nonrecurring $8.3 million ($1.47 per share) deferred tax benefit related to Kaplan’s international operations
Favorable $5.6 million ($1.00 per share) out of period deferred tax adjustment related to the KHE goodwill impairment from 2015


2015
Goodwill and other long-lived assets impairment charges of $225.2 million ($38.96 per share) at the education division and other business
Charges of $28.9 million ($4.97 per share) related to restructuring and non-operating Special Incentive Program charges at the education division, corporate office and other businesses
$15.3 million ($2.64 per share) in expense related to the modification of stock option awards and restricted stock awards
Net non-operating losses of $15.7 million ($2.82 per share) arising from the sales of five businesses and an investment, and on the formation of a joint venture
$13.2 million ($2.27 per share) gain on the sale of land
Losses, net, of $9.7 million ($1.67 per share) from non-operating unrealized foreign currency losses
2014
Charges of $20.2 million ($3.05 per share) related to restructuring and non-operating early retirement program expense and related charges at the education division and corporate office
Intangible and other long-lived assets impairment charge of $11.2 million ($1.69 per share) at the education division and other business
Gain from the sale of Classified Ventures of $249.8 million ($37.68 per share)
$58.2 million ($8.78 per share) gain from the Classified Ventures’ sale of apartments.com
Gain from the Berkshire exchange transaction of $266.7 million ($40.23 per share)
$81.8 million ($12.34 per share) gain on the sale of the corporate headquarters building
Losses, net, of $7.1 million ($1.08 per share) from non-operating unrealized foreign currency losses

116