# Graham Holdings Co: Form 10-Q for the period ended Sep 30, 2023

- Company: [Graham Holdings Co](/companies/ghc.md) (CIK 104889)
- Form: 10-Q
- Filed: 2023-11-01
- Accepted by EDGAR: Nov 1, 2023, 08:35 ET
- Period: 2023-09-30
- Accession: 0000104889-23-000064
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/104889/000010488923000064/ghc-20230930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/104889/000010488923000064/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-07-01 to 2023-09-30 | $1.11bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2023-01-01 to 2023-09-30 | $3.25bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Operating income | 3 months, 2023-07-01 to 2023-09-30 | −$57.1m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-01-01 to 2023-09-30 | $28.6m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2023-07-01 to 2023-09-30 | $11.8m | us-gaap:InterestExpense |
| Interest expense | 9 months, 2023-01-01 to 2023-09-30 | $37.9m | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-07-01 to 2023-09-30 | $9.4m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2023-01-01 to 2023-09-30 | $70.4m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-07-01 to 2023-09-30 | −$23.0m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-01-01 to 2023-09-30 | $152.0m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-07-01 to 2023-09-30 | −$5.02 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2023-01-01 to 2023-09-30 | $32.14 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-07-01 to 2023-09-30 | −$5.02 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-01-01 to 2023-09-30 | $32.23 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-07-01 to 2023-09-30 | 4,602,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-01-01 to 2023-09-30 | 4,700,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | $202.5m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2023-01-01 to 2023-09-30 | $61.2m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 9 months, 2023-01-01 to 2023-09-30 | $132.2m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2023-09-30 | $160.0m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-09-30 | $1.80bn | us-gaap:AssetsCurrent |
| Total assets | at 2023-09-30 | $6.69bn | us-gaap:Assets |
| Current liabilities | at 2023-09-30 | $1.15bn | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-09-30 | $2.95bn | us-gaap:Liabilities |
| Long-term debt | at 2023-09-30 | $739.8m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2023-09-30 | $21.9m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2023-09-30 | $3.69bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 59,002 characters.

This analysis should be read in conjunction with the condensed consolidated financial statements and the notes thereto.

### Results of Operations

The Company reported a net loss attributable to common shares of $23.0 million ($5.02 per share) for the third quarter of 2023, compared to net income attributable to common shares of $32.8 million ($6.76 per share) for the third quarter of 2022.

Items included in the Company’s net loss for the third quarter of 2023:

- $98.3 million in goodwill and other long-lived asset impairment charges (after-tax impact of $84.4 million, or $18.18 per share);
- $16.8 million in net gains on marketable equity securities (after-tax impact of $12.3 million, or $2.66 per share);
- $2.8 million in net losses of affiliates whose operations are not managed by the Company (after-tax impact of $2.1 million, or $0.45 per share);
- a $4.6 million credit to interest expense resulting from gains realized related to the termination of interest rate swaps (after-tax impact of $3.3 million, or $0.72 per share); and
- $1.1 million in interest expense to adjust the fair value of the mandatorily redeemable noncontrolling interest (after-tax impact of $1.0 million, or $0.22 per share).

Items included in the Company’s net income for the third quarter of 2022:

- a $1.7 million net credit related to a fair value change in contingent consideration from a prior acquisition at the education division ($0.35 per share);
- $54.2 million in net losses on marketable equity securities (after-tax impact of $40.2 million, or $8.28 per share);
- $2.7 million in net losses of affiliates whose operations are not managed by the Company (after-tax impact of $2.0 million, or $0.42 per share);
- a net non-operating gain of $0.6 million from the write-up of a cost method investment (after-tax impact of $0.4 million, or $0.09 per share); and
- $1.4 million in interest expense to adjust the fair value of the mandatorily redeemable noncontrolling interest (after-tax impact of $1.3 million, or $0.28 per share).

Revenue for the third quarter of 2023 was $1,111.5 million, up 10% from $1,012.4 million in the third quarter of 2022. Revenues increased at education, healthcare and automotive, partially offset by declines at television broadcasting, manufacturing and other businesses. The Company reported an operating loss of $57.1 million for the third quarter of 2023, compared to operating income of $59.5 million for the third quarter of 2022. The decrease in operating results is due to goodwill impairment charges at World of Good Brands (WGB, formerly Leaf Media) and Dekko and declines at television broadcasting, manufacturing, automotive and other businesses, partially offset by an increase at education.

For the first nine months of 2023, the Company recorded net income attributable to common shares of $152.0 million ($32.14 per share), compared to $60.9 million ($12.48 per share) for the first nine months of 2022.

Items included in the Company’s net income for the first nine months of 2023:

- a $4.2 million net credit related to a fair value change in contingent consideration from a prior acquisition at Corporate (after-tax impact of $4.1 million, or $0.89 per share);
- $99.1 million in goodwill and other-long lived asset impairment charges (after-tax impact of $85.0 million, or $18.30 per share);
- $9.6 million in expenses related to non-operating Separation Incentive Programs (SIPs) at other businesses and the education and television broadcasting divisions (after-tax impact of $7.2 million, or $1.54 per share);
- $113.4 million in net gains on marketable equity securities (after-tax impact of $83.6 million, or $17.99 per share);
- $9.7 million in net losses of affiliates whose operations are not managed by the Company (after-tax impact of $7.1 million, or $1.53 per share);
- a non-operating gain of $10.0 million on the sale of Pinna (after-tax-impact of $7.4 million, or $1.59 per share);
- non-operating gain of $3.9 million from the write-up and sales of cost method investments (after-tax impact of $2.9 million, or $0.63 per share);
- a $4.6 million credit to interest expense resulting from gains realized related to the termination of interest rate swaps (after-tax impact of $3.3 million, or $0.72 per share); and
- $1.4 million in net interest expense to adjust the fair value of the mandatorily redeemable noncontrolling interest (after-tax impact of $1.3 million, or $0.27 per share).

Items included in the Company’s net income for the first nine months of 2022:

- a $4.9 million net credit related to fair value changes in contingent consideration from prior acquisitions (after-tax impact of $4.9 million, or $1.00 per share);
- $172.9 million in net losses on marketable equity securities (after-tax impact of $127.9 million, or $26.19 per share);
- $2.8 million in net losses of affiliates whose operations are not managed by the Company (after-tax impact of $2.1 million, or $0.43 per share);
- Non-operating gain of $2.2 million from sales and write-up of cost and equity method investments (after-tax impact of $1.7 million, or $0.34 per share); and
- $12.8 million in interest expense to adjust the fair value of the mandatorily redeemable noncontrolling interest (after-tax impact of $12.3 million, or $2.51 per share).

Revenue for the first nine months of 2023 was $3,248.1 million, up 14% from $2,860.5 million in the first nine months of 2022. Revenues increased at education, healthcare and automotive, partially offset by declines at television broadcasting, manufacturing and other businesses. The Company reported operating income of $28.6 million for the first nine months of 2023, compared to $138.8 million for the first nine months of 2022. The decrease in operating results is due to goodwill impairment charges at WGB and Dekko and declines at television broadcasting, healthcare, and other businesses, partially offset by increases at education and automotive.

### Division Results

### Education

Education division revenue totaled $411.8 million for the third quarter of 2023, up 16% from $355.1 million for the same period of 2022. Kaplan reported operating income of $29.9 million for the third quarter of 2023, compared to $18.6 million for the third quarter of 2022.

For the first nine months of 2023, education division revenue totaled $1,192.1 million, up 12% from $1,066.1 million for the same period of 2022. Kaplan reported operating income of $83.0 million for the first nine months of 2023, compared to $57.8 million for the first nine months of 2022.

In the second quarter of 2023, Kaplan modified its segment reporting for Kaplan India, a shared services center that supports Higher Education (previously included in Kaplan corporate and other); prior periods have been reclassified to conform with the current presentation.

A summary of Kaplan’s operating results is as follows:

*(in thousands)*

| Revenue | Three Months Ended September 30 2023 | 2022 | % Change | Nine Months Ended September 30 2023 | 2022 | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Kaplan international | **$249,976** | $193,085 | 29 | **$714,715** | $598,469 | 19 |
| Higher education | **81,925** | 82,314 | 0 | **250,557** | 233,990 | 7 |
| Supplemental education | **78,332** | 79,566 | (2) | **226,535** | 233,416 | (3) |
| Kaplan corporate and other | **3,101** | 2,616 | 19 | **8,360** | 7,414 | 13 |
| Intersegment elimination | **(1,497)** | (2,517) | — | **(8,062)** | (7,200) | — |
|  | **$411,837** | $355,064 | 16 | **$1,192,105** | $1,066,089 | 12 |
| **Operating Income (Loss)** |  |  |  |  |  |  |
| Kaplan international | **$22,220** | $8,503 | — | **$64,272** | $48,130 | 34 |
| Higher education | **8,465** | 9,064 | (7) | **33,343** | 17,423 | 91 |
| Supplemental education | **9,729** | 9,471 | 3 | **16,992** | 17,671 | (4) |
| Kaplan corporate and other | **(7,412)** | (4,616) | (61) | **(20,074)** | (13,438) | (49) |
| Amortization of intangible assets | **(3,210)** | (3,980) | 19 | **(11,133)** | (12,190) | 9 |
| Impairment of long-lived assets | **—** | — | — | **(477)** | — | — |
| Intersegment elimination | **67** | 203 | — | **92** | 166 | — |
|  | **$29,859** | $18,645 | 60 | **$83,015** | $57,762 | 44 |

Kaplan International includes postsecondary education, professional training and language training businesses largely outside the United States. Kaplan International revenue increased 29% and 19% for the third quarter and first nine months of 2023, respectively (25% and 21%, respectively, on a constant currency basis). The increases are due largely to growth at Pathways, Australia, Languages and UK Professional, partially offset by a decline at Singapore. Kaplan International reported operating income of $22.2 million in the third quarter of 2023, compared to $8.5 million in the third quarter of 2022. The improved results are due largely to improved results at Australia, Pathways, UK Professional and Languages. Operating income increased to $64.3 million in the first nine months of 2023, compared to $48.1 million in the first nine months of 2022. The improved results are due largely to improved results at Australia, Pathways and Languages, partially offset by declines at UK Professional and Singapore.

Higher Education includes the results of Kaplan as a service provider to higher education institutions. Higher Education revenue was flat compared to the third quarter of 2022 and increased 7% for the first nine months of 2023. For the third quarter and first nine months of 2023 and 2022, Kaplan recorded a portion of the fee with Purdue Global based on an assessment of its collectability under the TOSA. Enrollments at Purdue Global for the first nine months of 2023 increased 5% compared to the first nine months of 2022. The Company will continue to assess the collectability of the fee with Purdue Global on a quarterly basis to make a determination as to whether to record all or part of the fee in the future and whether to make adjustments to fee amounts recognized in earlier periods. Higher Education results declined in the third quarter of 2023 due to a lower Purdue Global fee recorded compared to the third quarter of 2022, partially offset by a decline in other higher education development costs. Higher Education results improved in the first nine months of 2023 due to an increase in the Purdue Global fee recorded, and a decline in other higher education development costs.

As of September 30, 2023, Kaplan had a total outstanding accounts receivable balance of $127.8 million from Purdue Global related to amounts due for reimbursements for services, fees earned and a deferred fee. Included in this total, Kaplan has a $19.6 million long-term receivable balance due from Purdue Global at September 30, 2023, related to the advance of $20 million during the initial KU Transaction.

Supplemental Education includes Kaplan’s standardized test preparation programs and domestic professional and other continuing education businesses. Supplemental Education revenue declined 2% and 3% for the third quarter and first nine months of 2023, respectively, driven mostly by softness in Real Estate, Securities and Medical Licensure test preparation, offset in part by growth in CFP, CFA, Architecture and Engineering and MCAT test preparation and publishing activities. Overall, demand for graduate and pre-college test preparation programs has declined due to the strength of U.S. employment markets and the decline in test-takers, while demand for professional programs remained stable. Operating results improved in the third quarter of 2023 due to savings from reduced headcount, partially offset by lower revenues. Operating results declined in the first nine months of 2023 due to lower revenues, partially offset by savings from reduced headcount.

Kaplan corporate and other represents unallocated expenses of Kaplan, Inc.’s corporate office, other minor businesses and certain shared activities. Kaplan corporate and other expenses increased in the third quarter and first nine months of 2023, largely due to increased incentive compensation costs.

### Television Broadcasting

A summary of television broadcasting’s operating results is as follows:

*(in thousands)*

|  | Three Months Ended September 30 2023 | 2022 | % Change | Nine Months Ended September 30 2023 | 2022 | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Revenue | **$116,112** | $135,165 | (14) | **$347,818** | $380,970 | (9) |
| Operating Income | **31,947** | 52,331 | (39) | **93,720** | 131,911 | (29) |

Graham Media Group, Inc. 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 media management tools designed to connect newsrooms with their users. Revenue at the television broadcasting division decreased 14% to $116.1 million in the third quarter of 2023, from $135.2 million in the same period of 2022. The revenue decline is due primarily to a $20.3 million decline in political advertising revenue, partially offset by a modest increase in retransmission revenues. Operating income for the third quarter of 2023 declined 39% to $31.9 million, from $52.3 million in the same period of 2022, due to reduced revenues and higher network fees.

Revenue at the television broadcasting division decreased 9% to $347.8 million in the first nine months of 2023, from $381.0 million in the same period of 2022. The revenue decline is due primarily to a $23.8 million decline in political advertising revenue, winter Olympics and Super Bowl advertising at the Company’s NBC affiliates in the first quarter of 2022, as well as modest declines in digital advertising and retransmission revenues. Operating income for the first nine months of 2023 declined 29% to $93.7 million, from $131.9 million in the same period of 2022, due to reduced revenues and higher network fees. While per subscriber rates from cable, satellite and OTT providers have grown, overall cable and satellite subscribers are down due to cord cutting, resulting in retransmission revenue net of network fees in 2023 expected to be down modestly compared with 2022, and this trend is expected to continue in the future.

### Manufacturing

A summary of manufacturing’s operating results is as follows:

*(in thousands)*

|  | Three Months Ended September 30 2023 | 2022 | % Change | Nine Months Ended September 30 2023 | 2022 | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Revenue | **$109,216** | $122,964 | (11) | **$343,882** | $365,966 | (6) |
| Operating (Loss) Income | **(40,974)** | 9,647 | — | **(21,664)** | 24,124 | — |

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, 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.

Manufacturing revenues decreased 11% and 6% in the third quarter and first nine months of 2023, respectively. The revenue declines are due primarily to lower revenues at Hoover and Dekko, partially offset by increased revenues at Joyce and Forney. Revenues declined in the third quarter of 2023 at Hoover due largely to lower wood prices and a decrease in product demand. Revenues declined in the first nine months of 2023 at Hoover due largely to lower wood prices, partially offset by overall increased rates and higher product demand. Revenues declined at Dekko due largely to lower product demand, particularly in the commercial office electrical products sector. Overall, Hoover results included wood gains on inventory sales in the first nine months of 2023 and 2022, with gains in the first nine months of 2023 modestly higher than the prior year. For the third quarter of 2023, Hoover results included wood gains on inventory sales, compared with modest wood losses on inventory sales in the third quarter of 2022. Manufacturing operating results declined in the third quarter and first nine months of 2023 due primarily to a $47.8 million goodwill impairment charge at Dekko, resulting from continued sustained weakness in demand for certain Dekko power and data products, primarily in the commercial office sector. Excluding the impairment charge at Dekko, manufacturing operating results were down in the third quarter of 2023, due to declines at Dekko and Hoover, partially offset by improved results at Joyce and Forney. Excluding the impairment charge at Dekko, manufacturing operating results were down slightly in the first nine months of 2023, due to declines at Dekko, partially offset by improvements at Hoover and Joyce.

### Healthcare

A summary of healthcare’s operating results is as follows:

*(in thousands)*

|  | Three Months Ended September 30 2023 | 2022 | % Change | Nine Months Ended September 30 2023 | 2022 | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Revenue | **$116,164** | $87,176 | 33 | **$331,505** | $230,816 | 44 |
| Operating Income | **5,971** | 6,048 | (1) | **17,284** | 18,669 | (7) |

Graham Healthcare Group (GHG) provides home health and hospice services in seven states. GHG also provides other healthcare services, including nursing care and prescription services for patients receiving in-home infusion treatments through its 76.5% interest in CSI Pharmacy Holdings Company, LLC (CSI). In May 2022, GHG acquired two small businesses, one of which expanded GHG’s home health operations into Kansas and Missouri. In July 2022, GHG acquired a 100% interest in a multi-state provider of Applied Behavior Analysis clinics and in August 2022, GHG acquired two small businesses, which expanded GHG’s hospice services into Missouri and Ohio. Healthcare revenues increased 33% and 44% for the third quarter and first nine months of 2023, respectively, largely due to significant growth at CSI and from businesses acquired in 2022, along with growth in home health and hospice services.

In 2022, GHG implemented a new pension credit retention program in order to improve employee retention and utilize the Company’s surplus pension assets. The GHG pilot program offers a pension credit up to $50,000 per employee, cliff vested after three years of continuous employment for certain existing employees and new employees hired from January 1, 2022 through December 31, 2024. GHG recorded pension expense of $3.4 million and $10.1 million related to this program in the third quarter and first nine months of 2023, respectively.

The decline in GHG operating results in the third quarter and first nine months of 2023 is due largely to an increase in pension expense related to the new GHG pension credit retention program, partially offset by improved results at CSI and in home health and hospice. Excluding pension expense, GHG operating results increased in the third quarter and first nine months of 2023.

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 Condensed Consolidated Statements of Operations. The Company recorded equity in earnings of $1.9 million and $1.5 million for the third quarter of 2023 and 2022, respectively, from these joint ventures. The Company recorded equity in earnings of $6.9 million and $5.1 million for the first nine months of 2023 and 2022, respectively. During the first quarter of 2022, GHG, through its Residential Home Health Illinois and Residential Hospice Illinois affiliates, acquired an interest in the home health and hospice assets of NorthShore University HealthSystem, an integrated healthcare delivery system serving patients throughout the Chicago, IL area. The transaction resulted in a decrease to GHG’s interest in Residential Hospice Illinois and a $0.6 million non-operating gain was recorded in the first quarter of 2022 related to the change in interest.

### Automotive

A summary of automotive’s operating results is as follows:

*(in thousands)*

|  | Three Months Ended September 30 2023 | 2022 | % Change | Nine Months Ended September 30 2023 | 2022 | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Revenue | **$272,018** | $211,396 | 29 | **$765,251** | $509,965 | 50 |
| Operating Income | **8,237** | 11,050 | (25) | **28,540** | 25,493 | 12 |

Automotive includes seven automotive dealerships in the Washington, D.C. metropolitan area and Richmond, VA: Ourisman Lexus of Rockville, Ourisman Honda of Tysons Corner, Ourisman Jeep Bethesda, Ourisman Ford of Manassas, and Toyota of Woodbridge and Ourisman Chrysler-Dodge-Jeep-Ram (CDJR) of Woodbridge, which were acquired on July 5, 2022 from the Lustine Automotive Group. In addition, on September 27, 2023, the Company acquired a Toyota dealership in Henrico, VA from McGeorge Toyota. Christopher J. Ourisman, a member of the Ourisman Automotive Group family of dealerships, and his team of industry professionals operate and manage the dealerships; the Company holds a 90% stake. The automotive group has also been awarded a KIA Open Point dealership in Bethesda, MD with plans to commence operations by the end of the year.

Revenues for the third quarter of 2023 increased 29% due to sales growth at all dealerships, except for the Jeep dealership, which had lower revenues due to a decline in new vehicle sales. Revenues for the first nine months of 2023 increased 50% due to the acquisitions of the Toyota of Woodbridge and CDJR dealerships and sales growth at the other dealerships, except for the Jeep dealership, which had lower revenues due to a decline in new vehicle sales. Additionally, all of the dealerships reported sales growth for services and parts for the first nine month of 2023. Operating results for the third quarter of 2023 decreased due to declines at the Jeep, CDJR, Ford, and Lexus dealerships and transaction costs related to the McGeorge Toyota acquisition, partially offset by improved results at the Toyota of Woodbridge and Honda dealerships. Operating results for the first nine months of 2023 improved due largely to the Toyota of Woodbridge and CDJR acquisitions, and improved results at the Honda and Lexus dealerships, partially offset by declines at the Jeep dealership due primarily to declines in new vehicle sales and related margins, and declines at the Ford dealership in margins on new vehicle sales.

### Other Businesses

A summary of revenue by category for other businesses:

*(in thousands)*

| Operating Revenues | Three Months Ended September 30% 2023 | 2022 | Change | Nine Months Ended September 30% 2023 | 2022 | Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Retail (1) | **$28,446** | $38,990 | (27) | **$90,215** | $122,236 | (26) |
| Media (2) | **27,418** | 31,604 | (13) | **78,105** | 95,646 | (18) |
| Specialty (3) | **30,789** | 30,613 | 1 | **100,790** | 90,268 | 12 |
|  | **$86,653** | $101,207 | (14) | **$269,110** | $308,150 | (13) |

(1) Includes Society6 and Saatchi Art (formerly Leaf Marketplace) and Framebridge

(2) Includes WGB, Code3, Slate, Foreign Policy, Pinna and City Cast

(3) Includes Clyde’s Restaurant Group, Decile and CyberVista

Overall, revenue from other businesses declined 14% and 13% in the third quarter and first nine months of 2023, respectively. Retail revenue declined in the first nine months of 2023 largely due to significantly lower revenue at Society6, partially offset by revenue growth at Framebridge. Media revenue declined in the first nine months of 2023 due to lower revenue at WGB and Code3, partially offset by revenue growth at Slate and Foreign Policy. Specialty revenue increased in the first nine months of 2023 due to revenue growth at Clyde’s Restaurant Group (CRG). Excluding the former Leaf businesses, revenue from other businesses grew in the third quarter and first nine months of 2023.

Overall, operating results at other businesses declined in the first nine months of 2023 due to a $50.2 million goodwill impairment charge recorded at WGB, increased losses at the former Leaf businesses, Code3, Decile and City Cast; partially offset by improved results at CRG, Slate and Foreign Policy, reduced losses at Framebridge, and a reduction in losses due to the sales of CyberVista and Pinna.

#### Leaf Group

On June 14, 2021, the Company acquired Leaf Group Ltd. (Leaf), a consumer internet company headquartered in Santa Monica, CA, that builds enduring, creator-driven brands that reach passionate audiences in large and growing lifestyle categories, including fitness and wellness (Well+Good and Livestrong.com), and home, art and design (Saatchi Art, Society6 and Hunker).

In the second quarter of 2023, the Company restructured Leaf into three stand-alone businesses: Society6 (formerly included in Leaf Marketplace), Saatchi Art (formerly included in Leaf Marketplace) and World of Good Brands (WGB, formerly Leaf Media). The transition process for this restructuring involves various cost reduction initiatives, including elimination of shared services costs and functions; transitioning financial and human resources systems; and rationalizing physical facilities and data centers. In the first and second quarters of 2023, Leaf implemented a SIP to reduce the number of employees, which is being funded by the assets of the Company’s pension plan; $2.9 million and $3.9 million in related non-operating pension expense was recorded in the first and second quarters of 2023, respectively. Each of Society6, Saatchi Art and World of Good Brands is continuing with the transition and cost reduction process, which is expected to be completed by the end of the second quarter of 2024.

Revenue at each of the three Leaf businesses declined in the third quarter and first nine months of 2023, with substantial declines at Society6 and WGB. Revenue decreases at Society6 are due to declines in traffic, conversion rates and related sales for both direct to consumer and business to business categories; revenue declines at WGB are due to reduced traffic and the soft digital advertising market for both direct and programmatic categories. Overall, the Leaf businesses reported significant operating losses in each of the third quarters and first nine months of 2023 and 2022, with an increase in operating losses in the third quarter and first nine months of 2023.

As a result of the substantial digital advertising revenue declines and continued significant operating losses at WGB, the Company recorded a $50.2 million goodwill impairment charge in the third quarter of 2023.

#### Clyde’s Restaurant Group

CRG owns and operates 12 restaurants and entertainment venues in the Washington, D.C. metropolitan area, including Old Ebbitt Grill and The Hamilton. CRG reported an operating loss in the third quarter of 2023 and 2022 and an operating profit for the first nine months of 2023 and 2022. Both revenues and operating results improved in the first nine months of 2023, due to strong guest traffic, modest price increases, and the absence of any significant adverse impact from the COVID-19 pandemic. Operating results in the first nine months of 2022 benefited from a favorable rent concession.

CRG recently announced plans to open new restaurants in Baltimore, MD; Washington, D.C.; and Reston, VA in early 2024, mid 2024 and early 2025, respectively.

#### Framebridge

Framebridge is a custom framing service company, headquartered in Washington, D.C., with 20 retail locations in the Washington, D.C., New York City, Atlanta, GA, Philadelphia, PA, Boston, MA and Chicago, IL areas and two manufacturing facilities in Kentucky and New Jersey. Framebridge continues to actively explore opportunities for further store expansion. Revenues increased in the third quarter and first nine months of 2023 due to an increase in retail revenue from same-store sales growth and operating additional retail stores compared to the same periods in 2022. Framebridge is an investment stage business and reported significant operating losses in the first nine months of 2023 and 2022.

#### Other

Other businesses also include Code3, a performance marketing agency focused on driving performance for brands though three core elements of digital success: media, creative and commerce; Slate and Foreign Policy, which publish online and print magazines and websites; and two investment stage businesses, Decile and City Cast. Slate, Foreign Policy and City Cast reported revenue increases in the first nine months of 2023, while Code3 reported a revenue decline. Losses from City Cast, Code3 and Decile in the first nine months of 2023 adversely affected operating results, while Slate and Foreign Policy each reported an operating profit during this period.

Other businesses also included Pinna, which was sold in June 2023 when the Company entered into a merger agreement with Realm of Possibility, Inc. (Realm), a provider of audio entertainment services, to merge Pinna with Realm in return for a noncontrolling financial interest in the merged entity. In connection with the merger, the Company recorded a $10.0 million non-cash, non-operating gain related to the transaction. The Company held a noncontrolling interest in Realm prior to the transaction and continues to hold a noncontrolling interest in Realm following the transaction. The Company’s investment in Realm is reported as an equity method investment.

Other businesses also included CyberVista, which was sold in October 2022 when the Company announced a strategic merger of CyberVista and CyberWire, a B2B cybersecurity audio network to form a new parent company, N2K Networks. The Company’s investment in N2K Networks is reported as an equity method investment.

In the first and second quarters of 2023, Code3 implemented a SIP to reduce the number of employees, which is being funded by the assets of the Company’s pension plan; $1.2 million and $0.6 million in related non-operating pension expense was recorded in the first and second quarters of 2023, respectively.

### Corporate Office

Corporate office includes the expenses of the Company’s corporate office and certain continuing obligations related to prior business dispositions.

### Equity in (Losses) Earnings of Affiliates

At September 30, 2023, the Company held an approximate 18% interest in 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; a 49.9% interest in N2K Networks on a fully diluted basis; and a 42.3% interest in Realm on a fully diluted basis. 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. Overall, the Company recorded equity in losses of affiliates of $0.8 million for the third quarter of 2023, compared to $1.1 million for the third quarter of 2022. These amounts include $2.8 million and $2.7 million in net losses for the third quarter of 2023 and 2022, respectively, from affiliates whose operations are not managed by the Company.

The Company recorded equity in losses of affiliates of $2.2 million for the first nine months of 2023, compared to earnings of $2.9 million for the first nine months of 2022. These amounts include $9.7 million and $2.8 million in net losses for the first nine months of 2023 and 2022, respectively, from affiliates whose operations are not managed by the Company.

### Net Interest Expense and Related Balances

In connection with the acquisition of the Toyota of Richmond dealership, in September 2023, the automotive subsidiary of the Company entered into a credit agreement with Truist Bank, which includes (i) a $75.2 million real estate term loan, (ii) a $65.0 million capital term loan, (iii) an undrawn $50.0 million delayed draw term loan available upon request and (iv) establishment of a revolving floor plan credit facility. Additionally, the automotive subsidiary entered into interest rate swaps to fix the interest rate that the Company will pay on the $75.2 million real estate term loan at 6.42% per annum. The proceeds from this borrowing were used to finance the acquisition of the Toyota of Richmond dealership and to repay the outstanding balance of the automotive subsidiary commercial notes that were maturing in 2031 and 2032. The related interest rate swaps were also terminated, resulting in a realized gain of $4.6 million recorded as a credit to interest expense during the third quarter of 2023.

The Company incurred net interest expense of $9.8 million and $33.1 million for the third quarter and first nine months of 2023, respectively, compared to $10.8 million and $36.8 million for the third quarter and first nine months of 2022, respectively. The Company recorded interest expense of $1.1 million and $1.4 million in the third quarter and first nine months of 2023, respectively, to adjust the fair value of the mandatorily redeemable noncontrolling interest at GHG. The Company recorded interest expense of $1.4 million and $12.8 million in the third quarter and first nine months of 2022, respectively, to adjust the fair value of the mandatorily redeemable noncontrolling interest at GHG. Excluding these adjustments, the increase in net interest expense relates primarily to increased debt at the automotive dealerships and higher interest rates on the Company’s variable debt.

At September 30, 2023, the Company had $761.7 million in borrowings outstanding at an average interest rate of 6.3%, and cash, marketable equity securities and other investments of $873.0 million. At September 30, 2023, the Company had $60.9 million outstanding on its $300 million revolving credit facility.

### Non-operating Pension and Postretirement Benefit Income, net

The Company recorded net non-operating pension and postretirement benefit income of $35.7 million and $97.3 million for the third quarter and first nine months of 2023, respectively, compared to $50.7 million and $152.1 million for the third quarter and first nine months of 2022, respectively.

In the second quarter of 2023, the Company recorded $5.5 million in expenses related to non-operating SIPs at other businesses and the education and television broadcasting divisions. In the first quarter of 2023, the Company recorded $4.1 million in expenses related to non-operating SIPs at other businesses.

### Gain (Loss) on Marketable Equity Securities, net

Overall, the Company recognized $16.8 million and $113.4 million in net gains on marketable equity securities in the third quarter and first nine months of 2023, respectively, compared to $54.3 million and $172.9 million in net losses on marketable equity securities in the third quarter and first nine months of 2022, respectively.

### Other Non-Operating Income

The Company recorded total other non-operating income, net, of $3.6 million for the third quarter of 2023, compared to $2.4 million for the third quarter of 2022. The 2023 amounts included $1.7 million in foreign currency gains; $1.1 million in gains related to the sale of businesses and contingent consideration; a $0.1 million gain on sale of a cost method investment, and other items. The 2022 amounts included $1.4 million in gains related to the sale of businesses and contingent consideration; a $0.6 million fair value increase on a cost method investment, and other items; partially offset by $0.4 million in foreign currency losses.

The Company recorded total non-operating income, net, of $22.5 million for the first nine months of 2023, compared to $6.4 million for the first nine months of 2022. The 2023 amounts included a non-cash gain of $10.0 million on the sale of Pinna; $4.3 million in gains related to the sale of businesses and contingent consideration; a $3.1 million fair value increase on cost method investments; $1.8 million in foreign currency gains; a $1.0 million gain on sales of cost method investments, and other items. The 2022 amounts included $3.1 million in gains related to the sale of businesses and contingent consideration; $1.0 million in gains on sales of cost method investments; a $0.6 million gain on sale of an equity affiliate; a $0.6 million fair value increase on a cost method investment, and other items; partially offset by $2.0 million in foreign currency losses.

### Provision for Income Taxes

The Company’s effective tax rate for the first nine months of 2023 and 2022 was 31.1% and 29.6%, respectively.

### Earnings Per Share

The calculation of diluted earnings per share for the third quarter and first nine months of 2023 was based on 4,601,521 and 4,700,304 weighted average shares outstanding, respectively, compared to 4,819,661 and 4,853,267, respectively, for the third quarter and first nine months of 2022. At September 30, 2023, there were 4,578,889 shares outstanding. On May 4, 2023, the Board of Directors authorized the Company to acquire up to 500,000 shares of its Class B common stock; the Company has remaining authorization for 336,666 shares as of September 30, 2023.

### Other

The Company continuously assesses relevant events and circumstances to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. In the third quarter of 2023, the Company performed an interim impairment review at the Dekko, WGB and Framebridge reporting units.

As a result of continued sustained weakness in demand for certain Dekko power and data products primarily in the commercial office space market, the Company recorded a $47.8 million goodwill impairment charge at Dekko. After the impairment charge, no goodwill remains at the Dekko reporting unit, which is included in manufacturing.

As a result of the substantial digital advertising revenue declines and continued significant operating losses at WGB, the Company recorded a $50.2 million goodwill impairment charge to the reporting unit, which is included in other businesses. After the impairment charge, $7.5 million of goodwill remains at the WGB reporting unit.

The quantitative goodwill impairment analysis at Framebridge indicated the estimated fair value of the reporting unit, included in other businesses, exceeded its carrying value as of September 30, 2023. The estimated fair value of Framebridge exceeded its carrying value by a margin less than 10%. The total goodwill at this reporting unit was $60.9 million as of September 30, 2023, or 4% of the total goodwill of the Company.

It is possible that impairment charges, which may be material, could occur in the future, given changes in market conditions and the inherent variability in projecting future operating performance.

### Financial Condition: Liquidity and Capital Resources

The Company considers the following when assessing its liquidity and capital resources:

*(In thousands)*

|  | As of September 30, 2023 | December 31, 2022 |
| --- | ---: | ---: |
| Cash and cash equivalents | **$159,981** | $169,319 |
| Restricted cash | **40,657** | 21,113 |
| Investments in marketable equity securities and other investments | **672,346** | 622,408 |
| Total debt | **761,686** | 726,360 |

Cash generated by operations is the Company’s primary source of liquidity. The Company maintains investments in a portfolio of 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 revolving credit facility, amounting to $239.1 million at September 30, 2023 and the undrawn $50.0 million delayed draw term loan at the automotive subsidiary.

During the first nine months of 2023, the Company’s cash and cash equivalents decreased by $9.3 million, due to share repurchases, acquisitions, capital expenditures, a loan to a related party, additional investments in marketable equity securities and equity affiliates, and dividend payments, which was offset by cash generated from operations, the proceeds from the sale of marketable equity securities, net proceeds from the vehicle floor plan payable, and net borrowings. In the first nine months of 2023, the Company’s borrowings increased by $35.3 million, primarily due to the issuance of the term loan and new loans at the automotive subsidiary, offset by repayments under the revolving credit facility and commercial notes at the automotive subsidiary.

As of September 30, 2023 and December 31, 2022, the Company had money market investments of $39.7 million and $7.7 million, that are included in cash and cash equivalents. At September 30, 2023, the Company held approximately $90 million in cash and cash equivalents in businesses domiciled outside the U.S., of which approximately $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 September 30, 2023, the fair value of the Company’s investments in marketable equity securities was $665.5 million, which includes investments in the common stock of four publicly traded companies. During the first nine months of 2023, the Company purchased $4.6 million of marketable equity securities and sold marketable equity securities that generated proceeds of $62.0 million. At September 30, 2023, the net unrealized gain related to the Company’s investments totaled $439.5 million.

In April 2023, the Company entered into a term note agreement to loan Intersection $30.0 million at an interest rate of 9% per annum. The principal and interest on the note are payable in monthly installments over 5 years with the final payment due by May 2028. The outstanding balance on this loan was $29.3 million as of September 30, 2023.

The Company had working capital of $646.2 million and $534.1 million at September 30, 2023 and December 31, 2022, 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 September 30, 2023 and December 31, 2022, the Company had borrowings outstanding of $761.7 million and $726.4 million, respectively. The Company’s borrowings at September 30, 2023 were mostly from $400.0 million of 5.75% unsecured notes due June 1, 2026, $60.9 million in outstanding borrowings under the Company’s revolving credit facility, a term loan of $149.3 million, and real estate and capital term loans of $139.3 million at the automotive subsidiary. The Company’s borrowings at December 31, 2022 were mostly from $400.0 million of 5.75% unsecured notes due June 1, 2026, $200.2 million in outstanding borrowings under the Company’s revolving credit facility and commercial notes of $116.6 million at the automotive subsidiary. The interest on the $400.0 million of 5.75% unsecured notes is payable semiannually on June 1 and December 1.

During the nine months ended September 30, 2023 and 2022, the Company had average borrowings outstanding of approximately $737.1 million and $676.5 million, respectively, at average annual interest rates of approximately 6.0% and 4.6%, respectively. During the nine months ended September 30, 2023 and 2022, the Company incurred net interest expense of $33.1 million and $36.8 million, respectively.

On July 28, 2023, the Company entered into a $150 million term loan with each of the lenders party thereto, Wells Fargo Bank, N.A., JPMorgan Chase Bank N.A., Bank of America, N.A., HSBC Bank USA, N.A., and PNC Bank, N.A. The term loan is payable in quarterly installments of $1.875 million starting in December 2023 with a final payment of the principal balance due on May 30, 2027. The term loan bears interest at variable rates based on Secured Overnight Financing Rate (SOFR) plus 1.75% per annum. The Company may redeem the term loan in whole or in part with no penalty at any time. The term loan has no impact on the existing financial covenants of the revolving credit facility.

On September 26, 2023, the Company’s automotive subsidiary entered into a credit agreement with Truist Bank, which includes (i) a $75.2 million real estate term loan, (ii) a $65.0 million capital term loan, (iii) a $50.0 million delayed draw term loan, and (iv) establishment of a revolving floor plan credit facility. The real estate term loan is payable in monthly installments of $0.3 million and bears interest at variable rates based on SOFR plus 1.75% per annum, and the capital term loan is payable in monthly installments of $0.5 million and bears interest at variable rates based on SOFR plus 2.00% per annum. The monthly installment payments on the real estate and capital term loans commence on November 1, 2023, with final payments of the outstanding principal balances due on September 26, 2028. Subject to terms and conditions set forth in the credit agreement, the automotive subsidiary may also request borrowings of delayed draw term loans for which the proceeds may be used to (i) finance the acquisition of automobile dealerships (delayed draw capital loan) and (ii) finance the acquisition of real estate (delayed draw real estate loan). The delayed draw term loan bears interest at variable rates based on SOFR plus an applicable margin based on the type of delayed draw term loan requested. The delayed draw term loan availability period terminates on September 26, 2025. The automotive subsidiary did not borrow against the delayed term loan as of September 30, 2023.

On the same date, the Company’s automotive subsidiary entered into three interest rate swap agreements with a total notional value of $75.2 million and a maturity date of September 26, 2028. The interest rate swap agreements will pay the automotive subsidiary interest on the $75.2 million notional amount based on SOFR and the automotive subsidiary will pay the counterparty a fixed rate of 4.67% per annum. The new interest rate swap agreements were entered into to convert the variable rate borrowing under the real estate term loan into a fixed rate borrowing. Based on the terms of the new interest rate swap agreements and underlying borrowings, the new interest rate swaps were determined to be effective and thus qualify as cash flow hedges. Including a 1.75% applicable margin, the overall interest rate that the Company will pay on the $75.2 million real estate term loan is fixed at 6.42% per annum.

The automotive subsidiary used the net proceeds from the real estate and capital term loans to finance the acquisition of the Toyota of Richmond dealership and to repay the outstanding balances of the commercial notes maturing 2031 and 2032. The interest rate swap agreements maturing in 2031 and 2032 were also terminated resulting in realized gains of $4.6 million that reduced interest expense during the third quarter of 2023.

On August 17, 2023, Moody’s affirmed the Company’s credit rating and maintained the outlook as Stable. On April 4, 2023, Standard & Poor’s affirmed the Company’s credit rating and maintained the outlook as Stable.

The Company’s current credit ratings are as follows:

|  | Moody’s | Standard & Poor’s |
| --- | --- | --- |
| Long-term | Ba1 | BB |
| Outlook | Stable | Stable |

The Company expects to fund its estimated capital needs primarily through existing cash balances and internally generated funds, and, as needed, from borrowings under its revolving credit facility. As of September 30, 2023, the Company had $60.9 million outstanding under the $300 million revolving credit facility. 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.

In summary, the Company’s cash flows for each period were as follows:

*(In thousands)*

|  | Nine Months Ended September 30 2023 | 2022 |
| --- | ---: | ---: |
| Net cash provided by operating activities | **$202,526** | $203,665 |
| Net cash used in investing activities | **(119,431)** | (171,645) |
| Net cash used in financing activities | **(69,705)** | (8,184) |
| Effect of currency exchange rate change | **(3,184)** | (11,824) |
| **Net increase in cash and cash equivalents and restricted cash** | **$10,206** | $12,012 |

**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:

*(In thousands)*

|  | Nine Months Ended September 30 2023 | 2022 |
| --- | ---: | ---: |
| Net Income | **$156,014** | $63,791 |
| Adjustments to reconcile net income to net cash provided by operating activities: |  |  |
| Depreciation, amortization and goodwill and long-lived asset impairments | **201,408** | 102,981 |
| Amortization of lease right-of-use asset | **50,181** | 51,344 |
| Net pension benefit and special separation benefit expense | **(73,852)** | (136,411) |
| Other non-cash activities | **(86,439)** | 194,629 |
| Change in operating assets and liabilities | **(44,786)** | (72,669) |
| **Net Cash Provided by Operating Activities** | **$202,526** | $203,665 |

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 the first nine months of 2023 compared to the first nine months of 2022, the small decrease in net cash provided by operating activities is primarily driven by lower net income, after adjusting for non-cash activities, offset by a decrease in customer collections and vendor payments in 2023 compared to 2022 . The change in non-cash activities is largely the result of fluctuations in the share prices of the Company’s investments in marketable equity securities which resulted in a gain in 2023 compared to a loss in 2022.

**Investing Activities.** The Company’s net cash flow used in investing activities were as follows:

*(In thousands)*

|  | Nine Months Ended September 30 2023 | 2022 |
| --- | ---: | ---: |
| Investments in certain businesses, net of cash acquired | **$(77,004)** | $(130,177) |
| Purchases of property, plant and equipment | **(61,156)** | (57,097) |
| Net proceeds from sales of marketable equity securities | **55,817** | 39,163 |
| Loan to related party | **(30,000)** | — |
| Investments in equity affiliates, cost method and other investments | **(12,839)** | (30,075) |
| Other | **5,751** | 6,541 |
| **Net Cash Used in Investing Activities** | **$(119,431)** | $(171,645) |

*Acquisitions.* During the first nine months of 2023, the Company acquired four business: one in automotive, two small businesses in healthcare and one in other businesses for $82.3 million in cash and contingent consideration and the assumption of floor plan payables. In September 2023, the Company’s automotive subsidiary acquired a Toyota automotive dealership, including the real property for the dealership operations. In addition to a cash payment and the assumption of $2.2 million in floor plan payables, the automotive subsidiary borrowed $37.0 million to finance the acquisition. During the first nine months of 2022, the Company acquired seven businesses: five in healthcare and two in automotive, for $142.8 million in cash and contingent consideration and the assumption of floor plan payables. GHG acquired two small businesses in August 2022, a 100% interest in a multi-state provider of Applied Behavior Analysis clinics in July 2022, and two small businesses in May 2022. In July 2022, the Company’s automotive subsidiary acquired two automotive dealerships, including the real property for the dealership operations. In addition to a cash payment and the assumption of $10.9 million in floor plan payables, the automotive subsidiary borrowed $77.4 million to finance the acquisition.

*Capital Expenditures.* The amounts reflected in the Company’s Condensed Consolidated Statements of Cash Flows are based on cash payments made during the relevant periods, whereas the Company’s capital expenditures for the first nine months of 2023 of $71.6 million include assets acquired during the period. The Company estimates that its capital expenditures will be in the range of $95 million to $105 million in 2023.

*Net proceeds from sale of marketable equity securities.* During the first nine months of 2023 and 2022, the Company sold marketable equity securities that generated proceeds of $62.0 million and $74.2 million, respectively. The Company purchased $4.6 million and $35.1 million of marketable equity securities during the first nine months of 2023 and 2022.

*Loan to related party.* In April 2023, the Company entered into a term note agreement to loan Intersection $30.0 million at an interest rate of 9% per annum. The principal and interest on the note are payable in monthly installments over 5 years with the final payment due by May 2028. The outstanding balance on this loan was $29.3 million as of September 30, 2023.

*Investment in equity affiliates.* During the first nine months of 2022, GHG invested an additional $18.5 million in two affiliates to fund their acquisition of an interest in a health system in Illinois.

**Financing Activities.** The Company’s net cash flow used in financing activities were as follows:

*(In thousands)*

|  | Nine Months Ended September 30 2023 | 2022 |
| --- | ---: | ---: |
| Issuance of borrowings | **$293,387** | $77,299 |
| Net payments under revolving credit facility | **(140,000)** | (11,000) |
| Repayments of borrowings | **(117,792)** | (10,564) |
| Net proceeds from vehicle floor plan payable | **52,623** | 11,688 |
| Common shares repurchased | **(132,248)** | (54,581) |
| Dividends paid | **(23,534)** | (23,122) |
| Other | **(2,141)** | 2,096 |
| **Net Cash Used in Financing Activities** | **$(69,705)** | $(8,184) |

*Borrowings and Vehicle Floor Plan Payable.* In September 2023, the Company’s automotive subsidiary entered into a credit agreement with Truist Bank which includes (i) a $75.2 million real estate term loan, (ii) a $65.0 million capital term loan, (iii) a $50.0 million delayed draw term loan, and (iv) establishment of a revolving floor plan credit facility. The automotive subsidiary used the net proceeds from the real estate and capital term loans to acquire an automotive dealership, including the real property for the dealership operations, and to repay the outstanding balances of the commercial notes maturing in 2031 and 2032. On July 28, 2023, the Company entered into a $150 million term loan and used the proceeds to repay the U.S. dollar borrowings of the $300 million revolving credit facility. In July 2022, the Company’s automotive subsidiary amended its commercial note to, among other things, increase the aggregate loan amount to $71.6 million and entered into three commercial notes in an aggregate amount of $27.2 million. The additional borrowings were used to acquire two automotive dealerships, including the real property for the dealership operations. In the first nine months of 2023 and 2022, the Company made repayments on the $300 million revolving credit facility. In the first nine months of 2023 and 2022, the Company used vehicle floor plan financing to fund the purchase of new, used and service loaner vehicles at its automotive division. The proceeds from the vehicle floor plan payable fluctuates with changes in the amount of vehicle inventory held by the automotive dealerships.

*Common Stock Repurchases.* During the first nine months of 2023, the Company purchased a total of 224,871 shares of its Class B common stock at a cost of approximately $132.2 million. On May 4, 2023, 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 September 30, 2023, the Company had remaining authorization from the Board of Directors to purchase up to 336,666 shares of Class B common stock.

*Dividends.* The quarterly dividend rate per share was $1.65 and $1.58 for the first nine months of 2023 and 2022, respectively. The Company expects to pay a dividend of $6.60 per share in 2023.

*Other.* During the first nine months of 2023 and 2022, the Company paid $3.8 million and $4.7 million, respectively, related to deferred payments from prior acquisitions. During the first nine months of 2023 and 2022, the Company increased the borrowings under its cash overdraft facilities by $3.8 million and $4.4 million, respectively.

There were no other significant changes to the Company’s contractual obligations or other commercial commitments from those disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

### 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 report, in the Company’s Annual Report on Form 10-K and in the Company’s 2022 Annual Report to Stockholders, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected as a result of certain risks and uncertainties. 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, the prospects for growth in the Company’s various business operations and the Company’s future financial performance. As with any projection or forecast, forward-looking statements are subject to various risks and uncertainties, including the risks and uncertainties described in Item 1A of the Company’s Annual Report on Form 10-K, that could cause actual results or events to differ materially from those anticipated in such statements. Accordingly, undue reliance should not be placed on any forward-looking statement made by or on behalf of the Company. The Company assumes no obligation to update any forward-looking statement after the date on which such statement is made, even if new information subsequently becomes available.

## Market risk

As filed, 492 characters.

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 foreign business operations, which are subject to foreign exchange rate risk. The Company’s market risk disclosures set forth in its 2022 Annual Report filed on Form 10-K have not otherwise changed significantly.

## Controls and procedures

As filed, 1,430 characters.

### (a) 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 (principal executive officer) and the Company’s Chief 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 September 30, 2023. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures, as 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 Chief Financial Officer, in a manner that allows timely decisions regarding required disclosure.

### (b) 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 September 30, 2023 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Filed Nov 1, 2023.
Source: SEC EDGAR, the filing index for accession 0000104889-23-000064. Last ingested by Listed: Nov 6, 2026, 17:08 ET. No prices; not investment advice.