SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes ý. No ¨.

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,” “small reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨. No ý.

Shares outstanding at April ~~28, 2017:~~27, 2018:

Class A Common Stock – 964,001 Shares

Class B Common Stock – ~~4,626,753~~4,399,736 Shares

GRAHAM HOLDINGS COMPANY

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

GRAHAM HOLDINGS COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

See accompanying Notes to Condensed Consolidated Financial Statements.

GRAHAM HOLDINGS COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

See accompanying Notes to Condensed Consolidated Financial Statements.

GRAHAM HOLDINGS COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

See accompanying Notes to Condensed Consolidated Financial Statements.

GRAHAM HOLDINGS COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

See accompanying Notes to Condensed Consolidated Financial Statements.

GRAHAM HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION, BASIS OF PRESENTATION AND RECENT ACCOUNTING PRONOUNCEMENTS

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. The Company’s media operations comprise the ownership and operation of seven television broadcasting ~~stations.~~stations, several websites and print publications, and a marketing solutions provider. The ~~Company's~~Company’s other business operations include manufacturing and home health and hospice services.

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 2). The gain on the sale of the institutional assets of KU is included in other income, net, in the Condensed Consolidated Statement of Operations.

As a result of the transaction, Kaplan reorganized its higher education operations into the following two operating segments for the purpose of making operating decisions and assessing performance: Higher Education and Professional (U.S.) (see Note 16). The higher education segment comprises the historical KU for-profit postsecondary education business and the future non-academic operations support services provided to the new university, Purdue University Global. The Professional (U.S.) segment comprises the KU School of Professional and ~~manufacturing.~~Continuing Education, which provides professional training and exam preparation for professional certifications and licensures.

The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP.

Upon adoption of the new guidance, the Company recorded a net increase to the opening balance of retained earnings of $7.4 million. This adjustment was driven by changes in the timing of recognition of both revenues and

expenses. A change in revenue recognition at a manufacturing business resulted in the acceleration of revenue and associated expenses as revenue is now recognized over time versus at 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 ~~is in~~previously expensed such commissions as incurred. Upon adoption of the ~~process of evaluating the impact of this~~ new guidance, ~~on its Condensed Consolidated Financial Statements~~the Company capitalizes certain commission costs as an incremental cost of obtaining a contract and ~~believes such evaluation will extend over several future periods because of~~subsequently amortizes the ~~significance~~cost as the tuition services are delivered to students.

The cumulative effect of the changes to the ~~Company’s~~Company's Condensed Consolidated Balance Sheet as a result of adopting the new guidance was as follows:



(in thousands)	Balance as of December 31, 2017		Adjustments			Balance as of January 1, 2018
Assets
Accounts receivable, net	$	620,319	$	2,142		$	622,461
Inventories and contracts in progress	60,612		903			61,515
Other current assets	66,253		6,343			72,596
Liabilities
Accounts payable and accrued liabilities	$	526,323	$	88		$	526,411
Deferred revenue	339,454		(346		)	339,108
Deferred income taxes	362,701		2,197			364,898
Equity
Retained earnings	$	5,791,724	$	7,449		$	5,799,173

Under the modified retrospective method of adoption, the Company is required to disclose the impact the adoption of the revenue guidance had on its Condensed Consolidated Statement of Operations. If the company continued to follow its accounting policies under the previous guidance, revenue recognized would be $1.3 million lower and ~~business processes.~~expenses would be $3.0 million higher. 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. ~~Early adoption is not permitted.~~

The Company isadopted this guidance in the ~~process~~first quarter of ~~evaluating the impact~~2018 and recorded a cumulative adjustment of ~~this new guidance~~$194.9 million to retained earnings on its Condensed Consolidated ~~Financial Statements.~~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~~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 requires lessees and lessors to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The Company is in the process of evaluating the impact of this new guidance on its Condensed Consolidated Financial ~~Statements.~~

~~In March 2016,~~Statements; however, the ~~FASB issued new guidance that simplifies the accounting for stock-based compensation. The new guidance (i) requires all excess tax benefits~~recognition of right-of-use assets and tax deficiencies to be recognized in the income statement with the tax effects of vested or exercised awards treated as discrete items. Additionally, excess tax benefits will be recognized regardless of whether the benefit reduces taxes payable in the current period, effectively eliminating the APIC pool, (ii) concludes excess tax benefits should be classified as an operating activity in the statement of cash flows, (iii) requires an entity to make an entity-wide accounting policy election to either estimate a forfeiture rate for awards or account for forfeitures as they occur, (iv) changes the threshold for equity classification for cash settlements of awards for withholding requirements to the maximum statutory tax rate in the applicable jurisdiction and (v) concludes cash paid by an employer when directly withholding shares for tax-withholding purposes should be classified as a financing activity in the statement of cash flows. The guidancelease liabilities is effective for interim and fiscal years beginning after December 15, 2016. The Company adopted the new guidance as of January 1, 2017. As a result of adoption, the Company recognized a $5.9 million excess tax benefit as a discrete item in its tax provision related to the vesting of restricted stock awards in the first quarter of 2017. This tax benefit is classified as an operating activity on the Condensed Consolidated Statement of Cash Flows. Additionally, the Company elected to account for forfeitures of stock awards as they occur and not estimate a forfeiture rate. The Company does not expect this electionexpected to have a material ~~impact~~effect on its ~~financial statements.~~

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.

Income from Operations Non-operating pension and postretirement benefit income Income Before Income Taxes
(in thousands)
Three Months Ended March 31, 2017
As Reported $ 29,054
$ —
$ 23,786
Adjustment (18,801 ) 18,801
—
Upon Adoption 10,253
18,801
23,786

Three Months Ended March 31, 2016
As Reported $ 51,872
$ —
$ 60,615
Adjustment (15,677 ) 15,677
—
Upon Adoption 36,195
15,677
60,615

Twelve Months Ended December 31, 2016
As Reported $ 303,534
$ —
$ 250,658
Adjustment (80,665 ) 80,665
—
Upon Adoption 222,869
80,665
250,658

As of March 31, 2017 and December 31, 2016, the Company had commercial paper and money market investments of $442.9 million and $485.1 million, respectively, that are classified as cash, cash equivalents and restricted cash in the Company's Condensed Consolidated Balance Sheets.

There were no purchases of marketable equity securities during the first three months of 2017. The Company settled on $13.3 million of marketable equity securities during the first three months of 2016, of which $12.9 million were purchased in the first quarter.

There were no sales of marketable equity securities for the first three months of 2017. During the first three months of 2016, the net realized gains from the sales of marketable equity securities were $1.8 million. The total proceeds from such sales were $6.0 million, of which $1.6 million settled in April 2016.

As of March 31, 2017, the Company held interests in several affiliates; Residential Healthcare (Residential) held a 40% interest in Residential Home Health Illinois, a 42.5% interest in Residential Hospice Illinois and a 40% interest in the joint venture formed between Residential and a Michigan hospital; and Celtic Healthcare (Celtic) held a 40% interest in the joint venture formed between Celtic Healthcare and Allegheny Health Network (AHN). For the three months ended March 31, 2017, the Company recorded $4.6 million in revenue for services provided to the affiliates of Celtic and Residential.

Additionally, Kaplan International Holdings Limited (KIHL) held a 45% interest in a joint venture formed with York University. KIHL agreed to loan the joint venture £25 million, of which, £11.0 million was advanced in 2016. The loan will be repayable over 25 years at an interest rate of 7% and the loan is guaranteed by the University of York.

3. ACQUISITIONS AND DISPOSITIONS OF BUSINESSES

At the end of June 2017, Graham Healthcare Group (GHG) acquired a 100% interest in ~~Mander Portman Woodward,~~Hometown Home Health and Hospice, a ~~leading~~Lapeer, MI-based healthcare services provider ~~of high-quality, bespoke education to UK 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~~This acquisition expands GHG’s service area in Osborne Books, an educational publisher of learning resources for accounting qualifications in the UK, by purchasing all of its issued and outstanding shares. The primary reason for these acquisitions is based on several strategic benefits expected to be realized in the future. Both of these acquisitions are included in Kaplan International.

The 2017 fair values recorded were based upon preliminary valuations and the estimates and assumptions used in such valuations are subject to change, which could be significant, within the measurement period (up to one year from the acquisition date). The recording of deferred tax assets or liabilities, working capital and the final amount of residual goodwill and other intangibles are not yet finalized. Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the estimated future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. The goodwill recorded due to these acquisitions is attributable to the assembled workforces of the acquired companies and expected synergies. No goodwill is expected to be deducted for the acquisitions completed in 2017. The Company expects to deduct ~~$22.2~~$0.9 million of goodwill for income tax purposes for the acquisitions completed during the first three months of 2018. The Company expects to deduct $11.0 million of goodwill for income tax purposes for the acquisitions completed in ~~2016.~~

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.

The new university will operate almost exclusively 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

will provide to Purdue University Global will include 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.

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 percent 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.

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 percent 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.

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

~~In January 2016,~~2017, Kaplan Australia completed the sale of ~~Colloquy,~~a small business, which was included in Kaplan ~~Corporate~~International. As a result of these sales, the Company reported gains (losses) in other non-operating income (see Note 13).

As of March 31, 2018 and ~~Other.~~December 31, 2017, the Company had money market investments of $111.8 million and $217.6 million, respectively, that are classified as cash, cash equivalents and restricted cash in the Company’s Condensed Consolidated Balance Sheets.

There were no purchases of marketable equity securities during the first three months of 2018 and ~~a Michigan hospital formed a joint venture to provide home health services to patients~~2017.

During the first three months of 2018, the gross cumulative realized gains from the sales of marketable equity securities were $28.5 million. The losses recognized in ~~western Michigan. In connection with this transaction, Residential contributed its western Michigan home health operations to~~earnings from these marketable equity securities sold were $2.6 million for the ~~joint venture and then sold 60%~~first three months of 2018. The total proceeds from such sales were $50.5 million, of which $0.9 million settled in April 2018. There were no sales of marketable equity securities for the first three months of 2017.

For the first three months of 2018, the net unrealized losses on equity securities still held at the end of the ~~newly formed venture to its Michigan hospital partner. Although~~period were $11.5 million.

As of March 31, 2018, the Company held an approximate 11% interest in Intersection Holdings, LLC, and in several other affiliates; GHG held a 40% interest in Residential ~~manages the operations of the joint venture,~~Home Health Illinois, a 42.5% interest in Residential ~~holds~~Hospice Illinois, a 40% interest in the joint venture ~~so the operating results of~~formed between GHG and a Michigan hospital, and a 40% interest in the joint venture ~~are not consolidated~~formed between GHG and Allegheny Health Network (AHN). For 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,~~three months ended March 31, 2018 and 2017, the Company recorded ~~an increase~~$3.7 million and $4.6 million, respectively, in revenue for services provided to ~~redeemable noncontrolling interest~~the affiliates of ~~$3.0 million, with~~GHG.

Additionally, Kaplan International Holdings Limited (KIHL) held 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 and Residential combined their business operations to form GHG. The redeemable noncontrolling interest shareholders in Celtic exchanged their 20%45% interest in ~~Celtic for~~ a ~~10% mandatorily redeemable noncontrolling interest~~joint venture formed with York University. KIHL agreed to loan the joint venture £25 million, of which £16.0 million was advanced as of December 31, 2017. There was no additional funding advanced in the ~~combined entity~~first three months of 2018. The loan will be repayable over 25 years at an interest rate of 7% 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. The minority shareholders have an option to put their shares to the Company starting in 2020, and are required to put a percentage of their shares in 2022 and 2024, with the remaining shares required to be putloan is guaranteed by the ~~minority shareholders in 2026. The redemption value is based on an EBITDA multiple, adjusted for working capital and other items, computed annually, with no limit on the amount payable.~~ University of York.

The Company ~~now owns 90%~~held investments without readily determinable fair values in a number of ~~GHG. Because the noncontrolling interest is now mandatorily redeemable by the Company by 2026, it is reported~~equity securities that are accounted for as ~~a noncurrent liability at~~cost method investments. The carrying amount of these investments was $19.9 million as of March 31, 2018 and December 31, 2017.

4. ACCOUNTS RECEIVABLE

Bad debt expense was $5.8 million for each of the three months ended March 31, 2018 and 2017.

6. GOODWILL AND OTHER INTANGIBLE ASSETS

The Company reorganized its operations in the first quarter of 2018 into the following six operating segments for the purpose of making operating decisions and assessing performance: Higher Education, Professional (U.S.), Test Preparation, Kaplan International, Television Broadcasting and Healthcare (see Note 16). The reorganization changed the composition of the reporting units within the education division, and resulted in the reassignment of the assets and liabilities to the reporting units affected. The goodwill was allocated to the affected reporting units using the relative fair value approach. As a result of the reassignment and allocation, the Company performed an interim review of the carrying value of goodwill at the education division for possible impairment on both a pre and post-reorganization basis. No impairment of goodwill was indicated at the pre- and post-reorganization reporting units.

Amortization of intangible assets for the three months ended March 31, 2018 and 2017 ~~and 2016~~ was ~~$6.8~~$10.4 million and ~~$6.3~~$6.8 million, respectively. Amortization of intangible assets is estimated to be approximately ~~$22~~$31 million for the remainder of ~~2017, $26 million in~~ 2018, ~~$23~~$40 million in 2019, ~~$21~~$37 million in 2020, ~~$15~~$31 million in 2021, $25 million in 2022 and ~~$47~~$67 million thereafter.

5.7. DEBT

The Company’s borrowings consist of the following:


	As of						As of
	March 31, 2017			December 31, 2016			March 31, 2018			December 31, 2017
(in thousands)	March 31, 2017			December 31, 2016			March 31, 2018			December 31, 2017
7.25% unsecured notes due February 1, 2019 ⁽¹⁾	$	399,166		$	399,052		$	399,621		$	399,507
UK Credit facility ⁽²⁾⁽¹⁾	92,856			91,316			98,006			93,671
Other indebtedness	1,322			1,479			106			109
Total Debt	$	493,344		$	491,847		$	497,733		$	493,287
Less: current portion	(6,158		)	(6,128		)	(406,654		)	(6,726		)
Total Long-Term Debt	$	487,186		$	485,719		$	91,079		$	486,561

The Company's 7.25% unsecured notes due on February 1, 2019 are now classified as current liabilities at March 31, 2018.

The Company’s other indebtedness at March 31, 2018 and December 31, 2017 is at ~~interest rates from 2% and 6% and matures from 2019 to 2025.~~

On July 14, 2016, Kaplan entered into a Facility 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. As of March 31, 2017, the Company is in compliance with all financial covenants.

~~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~~2% 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 resultingmatures 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 in the fair value of the interest rate swap are recorded in other comprehensive income on the accompanying Condensed Consolidated Balance Sheets until earnings are affected by the variability of cash flows.2026.

At March 31, 2018, the fair value of the Company’s 7.25% unsecured notes, based on quoted market prices (Level 2 fair value assessment), totaled $412.2 million, compared with the carrying amount of $399.6 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 ~~$431.8~~$414.7 million, compared with the carrying amount of $399.2 million. At December 31, 2016, the fair value of the Company’s 7.25% unsecured notes, based on quoted market prices (Level 2 fair value assessment), totaled $438.7 million, compared with the carrying amount of $399.1$399.5 million. The carrying value of the Company’s other unsecured debt at March 31, 2018 and December 31, 2017 approximates fair value.

6.8. FAIR VALUE MEASUREMENTS

The Company’s financial assets and liabilities measured at fair value on a recurring basis were as follows:


	As of March 31, 2017								As of March 31, 2018
(in thousands)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets
Money market investments ⁽¹⁾	$	—	$	442,864	$	—	$	442,864	$	—	$	111,752	$	—	$	111,752
Marketable equity securities ⁽³⁾	433,787		—		—		433,787
Other current investments ⁽⁴⁾	5,702		17,069		—		22,771
Marketable equity securities ⁽²⁾									471,703		—		—		471,703
Other current investments ⁽³⁾									12,715		7,031		—		19,746
Interest rate swap ⁽⁴⁾									—		11		—		11
Total Financial Assets	$	439,489	$	459,933	$	—	$	899,422	$	484,418	$	118,794	$	—	$	603,212
Liabilities
Deferred compensation plan liabilities ⁽⁵⁾	$	—	$	43,949	$	—	$	43,949	$	—	$	36,373	$	—	$	36,373
Interest rate swap ⁽⁶⁾	—		488		—		488
Mandatorily redeemable noncontrolling interest ⁽⁷⁾	—		—		12,584		12,584		—		—		10,331		10,331
Total Financial Liabilities	$	—	$	44,437	$	12,584	$	57,021	$	—	$	36,373	$	10,331	$	46,704

Money market investments ⁽¹⁾

Commercial paper ⁽²⁾

Marketable equity securities ⁽³⁾

Other current investments ⁽⁴⁾

Marketable equity securities ⁽²⁾

Other current investments ⁽³⁾

Deferred compensation plan liabilities ⁽⁵⁾

Interest rate swap ⁽⁶⁾

Mandatorily redeemable noncontrolling interest ⁽⁷⁾

The Tax Cuts and Jobs Act (the Tax Act) was enacted in December 2017, making significant changes to the Internal Revenue Code. The SEC staff issued Staff Accounting Bulletin No. 118 (SAB 118) to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. SAB 118 allows the registrant to record provisional amounts during a measurement period not to extend

beyond one year of the enactment date. The ultimate impact may materially differ from these provisional amounts due to, among other things, additional analysis, changes in interpretations and assumptions the Company made, additional regulatory guidance that may be issued, and actions the Company may take as a result of the Tax Act. In accordance with SAB 118, the Company has calculated a reasonable estimate of the impact of the Tax Act and recorded a provisional amount in its financial statements based on its understanding of the Tax Act and guidance available as of the date of this filing. The Company expects to complete its analysis within the measurement period in accordance with SAB 118.

Changes as a result of the Tax Act include, but are not limited to, a reduction in the federal corporate income tax rate from 35% 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 Company estimates that it will 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.

Further, the Tax Act provides a 100% dividends received deduction for distributions from non-U.S. subsidiaries after December 31, 2017, subject to certain holding period requirements. 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 not yet decided whether to elect to record the GILTI tax regime as either a deferred tax accounting item or as a periodic tax expense. The company estimated the 2018 annual GILTI tax expense and included this current period GILTI tax provision estimate when determining the first quarter 2018 tax provision.

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. The Company will be monitoring 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 anticipates that the education division may release valuation allowances against state deferred tax assets of approximately $22.7 million within the next 12 months, as the education division may generate positive operating results that would support the realization of these deferred tax assets.

10. REVENUE FROM CONTRACTS WITH CUSTOMERS

The Company generated 74% of its revenues from U.S. domestic sales and 26% from non-U.S. sales.

In the first quarter of 2018, the Company recognized 81% of its revenues over time as control of the services and goods transferred to the customer. The remaining 19% of revenues were 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 below for each revenue stream.

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 Revenues. Education revenue is primarily derived from postsecondary education services, professional 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.

Higher Education (KHE). In the first quarter of 2018, KHE provided postsecondary education services to students through KU's online programs and fixed-facility colleges. On March 22, 2018, Kaplan contributed the institutional assets and operations of KU to Purdue University Global (see Note 2). Subsequent to the transaction, KHE provides non-academic operations support services to Purdue University Global pursuant to the TOSA.

Higher education contracts consist either of one performance obligation that is a combination of distinct promises to a student, or two performance obligations if the student also enrolls in the Kaplan Tuition Cap. The Kaplan Tuition Cap establishes a maximum amount of tuition that KHE may charge students for higher education services. This effectively offers the student a discount on future higher education services, if exercised, and is accounted for as a material right. The transaction price of a higher education contract is stated in the contract and known at the time of contract inception, therefore no variable consideration exists. A portion of the transaction price is allocated to the material right, if applicable, based on the expected value method.

Higher education services revenue is recognized ratably over the instruction period. The Company generally uses the time elapsed method, an input measure, as it best depicts the simultaneous consumption and delivery of higher education services.

KHE provides first-time undergraduate students with a risk-free trial period through the Kaplan Commitment. The Company defers recognizing revenue related to services provided during the Kaplan Commitment timeframe as KHE does not have an enforceable right to payment during the trial period and therefore a valid contract does not exist.

KHE’s refund policy may permit students who do not complete a course to be eligible for a refund for the portion of the course they did not attend. The amount of the refund differs by school, program and state, as some states require different policies. Refunds generally result in a reduction of deferred revenue during the period that the student drops or withdraws from a class.

Kaplan Professional (U.S.) (KP): KP provides professional training and exam preparation for professional certifications and licensures to students. KP contracts include promises for professional education services and course materials. Generally KP revenue contracts consist of multiple performance obligations as each distinct promise is both capable of being distinct and distinct in 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. KP generally determines standalone selling prices based on the 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.

Professional education services revenue is recognized ratably over the period of access. KP generally uses the time elapsed method, an input measure, as it best depicts the simultaneous consumption and availability of access to professional education 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.

Kaplan Test Preparation (KTP). KTP 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 adjusted 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.

Revenue allocated to remaining performance obligations represents deferred revenue amounts that will be recognized as revenue in future periods. As of March 31, 2018, KTP’s deferred revenue balance related to certain medical and nursing qualifications with an original contract length greater than twelve months was $7.0 million. KTP expects to recognize 80% of this revenue over the next twelve months and the remainder thereafter.

Kaplan International (KI). KI provides higher education, professional education, and test preparation services and materials to students primarily in the United Kingdom, Singapore, and Australia. Some KI contracts consist of one performance obligation that is a combination of indistinct promises to the student while other KI contracts include multiple performance obligations as the promises in the contract are both capable of being distinct and distinct within the context of the contract. One KI 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. KI 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. KI 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.

Television Broadcasting Revenues. Television broadcasting revenues at Graham Media Group (GMG) are primarily comprised of television and internet advertising revenues, and retransmission revenues.

Television Advertising Revenues. GMG accounts for the series of advertisements included in television advertising contracts as one performance obligation. GMG recognizes advertising revenue, net of agency commissions, 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 sixty days of revenue recognition.

Retransmission Revenues. Retransmission revenue represents compensation paid by cable, satellite and other multichannel video programming distributors (MVPDs) to retransmit GMG’s stations’ broadcasts in its designated market area. 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 one 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 sixty days of revenue recognition.

Manufacturing Revenues. Manufacturing revenue consists primarily of product sales generated by four 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 c

ontract. 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 revenues are 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 towards 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 29% of the manufacturing revenues recognized in the first quarter of 2018.

Other manufacturing revenues are 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 ninety 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 Revenues. 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 that healthcare services contracts generally have one 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. Healthcare revenues are 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 within sixty 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.

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.

Other Revenues. The Company recognizes revenue associated with management services it provides to its affiliates. The Company accounts for the management services provided as one 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.

SocialCode Revenues. SocialCode generates media management revenue in exchange for providing social media marketing solutions to its clients. The Company determined that SocialCode contracts generally have one 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.

SocialCode recognizes revenue, net of media acquisition costs, over time as media management services are delivered to the customer. Generally, SocialCode recognizes revenue using the right to invoice practical expedient, an output method, as SocialCode’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, SocialCode does not determine the transaction price or allocate any variable consideration at contract inception. Rather, SocialCode 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 forty-five days of revenue recognition.

SocialCode evaluates whether it is the principal (i.e. presents revenues on a gross basis) or agent (i.e. presents revenues on a net basis) in its contracts. SocialCode presents revenues for media management services net of media acquisition costs, as an agent, as SocialCode does not control the media before placement on social media platforms.

Other Revenues. Other revenues primarily include advertising and circulation revenues from Slate, Panoply and Foreign Policy. The Company accounts for other advertising revenues consistently with the advertising revenue streams addressed above. Circulation revenues consist of fees that provide customers access to online and print publications. The Company recognizes circulation revenues ratably over the subscription period beginning on the date that the publication 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.

Accounting 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.

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 and (iii) contracts for which the consideration received is a usage-based royalty promised in exchange for a license of intellectual property.

With the exception of the education division, the Company expenses costs to obtain a contract as incurred as all contracts are less than one year.

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 period ended March 31, 2018:



	As of
	March 31, 2018		January 1, 2018		%
(in thousands)	March 31, 2018		January 1, 2018		Change
Deferred revenue	$	298,543	$	342,640	(13)

The majority of the change in the deferred revenue balance is related to the KU Transaction. During the first three months of 2018, $159.3 million of revenue was recognized relating to the Company’s deferred revenue balance as of January 1, 2018.

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 line basis over the amortization period. These expenses are included as operating expenses in the Company’s Condensed Consolidated Statement of Operations.

The following table presents changes in the Company’s costs to obtain a contract asset during the period ended March 31, 2018:



(in thousands)	Balance at Beginning of Period		Costs associated with new contracts		Less: Costs amortized during the period			Other		Balance at End of Period
2018	$	19,178	$	11,575	$	(11,013	)	$	329	$	20,069

The majority of other activity is related to currency translation adjustments during the period ended March 31, 2018.

11. EARNINGS PER SHARE

The ~~Company's~~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 the 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.

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:

The diluted earnings per share amounts for the three months ended March 31, ~~2017~~2018 and March 31, ~~2016~~2017 exclude the effects of 104,000 and 102,000 stock options outstanding, as their inclusion would have been antidilutive due to a market condition. The diluted earnings per share amounts for the three months ended March 31, ~~2017~~2018 and

March 31, ~~2016~~2017 exclude the effects of ~~5,450~~5,250 and ~~6,100~~5,450 restricted stock awards, respectively, as their inclusion would have been antidilutive due to a performance condition.

In the three months ended March 31, ~~2017,~~2018, and March 31, ~~2016,~~2017, the Company declared regular dividends totaling $2.66 and $2.54 ~~and $2.42~~per common share, respectively.

8.12. PENSION AND POSTRETIREMENT PLANS

In the first quarter of 2018, the Company adopted new guidance which requires the presentation of service cost in the same line item as other compensation costs arising from services by employees during the period, while the other components of the net periodic benefit are recognized in non-operating pension and postretirement benefit income in the Company's Condensed Consolidated Statement of Operations.

On March 22, 2018, the Company eliminated the accrual of pension benefits for certain Kaplan University employees related to their future service. 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 curtailment 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, net on the Condensed Consolidated Statement of Operations.

The Company manages approximately 45% of the pension assets internally, of which the majority is invested in a U.S. stock index fund with the remaining investments in Berkshire Hathaway stock and short-term fixed income securities. The remaining 55% of plan assets are ~~still~~ managed by two investment companies. The goal for the investments is to produce moderate long-term growth in the value of these assets, while protecting them against large decreases in value. Both investment managers may invest in a combination of equity and fixed-income securities and cash. The managers are not permitted to invest in securities of the Company or in alternative investments. The investment managers cannot invest more than 20% of the assets at the time of purchase in the

stock of Berkshire Hathaway or more than 10% of the assets in the securities of any other single issuer, except for obligations of the U.S. Government, without receiving prior approval from the Plan administrator. As of March 31, ~~2017,~~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 March 31, ~~2017.~~2018. 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 March 31, ~~2017~~2018 and December 31, ~~2016,~~2017, the pension plan held investments in one common stock and one U.S. stock index fund that exceeded 10% of total plan assets. These investments were valued at ~~$990.9~~$1,052.8 million and ~~$978.8~~$1,079.3 million at March 31, ~~2017~~2018 and December 31, ~~2016,~~2017, respectively, or approximately ~~47%~~45% and ~~48%~~46%, respectively, of total plan assets.

9.13. OTHER NON-OPERATING INCOME

A summary of non-operating income is as follows:


	Three Months Ended March 31						Three Months Ended March 31
(in thousands)	2017			2016			2018		2017
Foreign currency gain (loss), net	1,728			(5,443		)
(Loss) gain on sales of businesses	(342		)	18,931
Gain on sales of marketable equity securities	—			1,754
Gain (loss) on sales of businesses							$	5,907	$	(342	)
Gain on sale of a cost method investment							2,845		—
Foreign currency gain, net							177		1,728
Other, net	(537		)	(146		)	258		(537		)
Total Other Non-Operating Income	$	849		$	15,096		$	9,187	$	849

In the first quarter of ~~2016, Kaplan sold Colloquy, which was~~2018, the Company recorded a ~~part~~$5.9 million gain on the sale of ~~Kaplan corporate and other, for~~two businesses in the education division, including a gain of ~~$18.9 million.~~$4.3 million on the Kaplan University transaction (see Note 2).

~~10.~~14. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

~~11.~~

15. CONTINGENCIES

Litigation, Legal and Other ~~Matters.~~Matters. The Company and its subsidiaries are ~~involved~~subject to complaints and administrative proceedings and are defendants in various ~~legal, regulatory and other proceedings~~civil lawsuits that ~~arise~~have arisen in the ordinary course of ~~its business.~~their businesses, including contract disputes; actions alleging negligence, libel, defamation, invasion of privacy; trademark, copyright and patent infringement; U.S. False Claims Act (False Claims Act) violations; violations of applicable wage and hour laws; and statutory or common law claims involving current and former students and employees. Although the outcomes of ~~these~~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~~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 ~~accrued~~recorded could reach approximately ~~$20~~$30 million.

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 2018 and earlier years, which have been paid by Kaplan. Kaplan has challenged these assessments and the case is currently on appeal to a tax tribunal with a hearing expected later in 2018 or 2019. The Company believes it has met all requirements under U.K. VAT law and expects to recover the £12.0 million receivable related to the assessments that have been paid. If the Company does not prevail in this case, a pre-tax charge of £12.0 million will be recorded to operating expense in the Company’s statement of operations.

EDDepartment of Education (ED) Program Reviews. The ED has undertaken program reviews at various KHE locations. Currently, there are five open program reviews, four of which are at campuses that were formerly a part of the KHE Campuses business, including the ED’s final reports on the program reviews at former KHE Hammond, IN, San Antonio, TX, Broomall, PA, and Pittsburgh, PA, locations. Kaplan retains responsibility for any financial obligation resulting from the ED program reviews at the KHE Campuses business that were open at the time of sale.

On February 23, 2015, the ED began a review of Kaplan ~~University.~~University (KU). The review will assess Kaplan’s administration of its Title IV ~~HEA~~and Higher Education Act programs and will initially focus on the 2013 to 2014 and 2014 to 2015 award years. On December 17, 2015, ~~Kaplan University~~KU received a notice from the ED that it had been placed on provisional certification status until September 30, 2018, in connection with the open and ongoing ED program review. The ED has not notified ~~Kaplan University~~KU of any negative findings. However, at this time, Kaplan cannot predict the outcome of this review, when it will be completed or any liability or other limitations that the ED may place on ~~Kaplan University~~KU as a result of this review. ~~During~~

In addition, there are two open program reviews at campuses that were part of the ~~period~~KHE Campuses business prior to its sale in 2015 to Education Corporation of ~~provisional certification,~~America (ECA), and we await the ED’s final reports on the program reviews at former KHE Broomall, PA; and Pittsburgh, PA, locations. Kaplan retains responsibility for any financial obligation resulting from the ED program reviews at KU University ~~must obtain prior ED approval to~~and KHE Campuses business that were open ~~a new location, add an educational program, acquire another school or make any other significant change.~~at the time of sale.

The Company does not expect the open program reviews to have a material impact on KHE; however, the results of open program reviews and their impact on Kaplan’s operations are uncertain.

~~12.~~16. BUSINESS SEGMENTS

The Company ~~has four~~reorganized its operations in the first quarter of 2018 into the following six reportable ~~segments:~~segments for the purpose of making operating decisions and assessing performance: Kaplan Higher Education, Kaplan Professional (U.S.), Kaplan Test Preparation, Kaplan International, Television Broadcasting and ~~television broadcasting.~~Healthcare.

As a result of the Kaplan University transaction, Kaplan reorganized its higher education operations into the following two operating segments: Higher Education and Professional (U.S.). The higher education segment comprises the historical KU for-profit postsecondary education business and the future non-academic operations support services provided to the new university, Purdue University Global. The Professional (U.S.) segment comprises the KU School of Professional and Continuing Education, which provides professional training and exam preparation for professional certifications and licensures.

The business segments disclosed in the condensed consolidated financial statements are based on this new organizational structure and information reviewed by the Company's management to evaluate the business segment results. Segment operating results for the first quarter of 2017 have been restated to reflect this organizational change. Additionally, the Company includes the comparative results of the Company's segments for each quarter in fiscal year 2017 as well as fiscal years 2017 and 2016.

The following table summarizes the quarterly financial information related to each of the Company’s business segments:



	Three Months Ended
	March 31,			March 31,			June 30,			September 30,			December 31,
(in thousands)	2018			2017			2017			2017			2017
Operating Revenues
Education	$	375,499		$	372,897		$	386,499		$	376,805		$	380,575
Television broadcasting	108,802			91,496			106,102			101,295			111,023
Healthcare	37,621			36,899			38,220			40,473			38,610
Other businesses	137,538			81,425			145,266			138,652			145,660
Corporate office	—			—			—			—			—
Intersegment elimination	(24		)	—			—			—			(51		)
	$	659,436		$	582,717		$	676,087		$	657,225		$	675,817
Income (Loss) from Operations
Education	$	22,700		$	9,437		$	33,331		$	13,797		$	21,122
Television broadcasting	40,542			26,483			39,777			33,462			39,536
Healthcare	(1,391		)	(926		)	384			920			(2,947		)
Other businesses	(3,695		)	(9,638		)	(9,302		)	(7,021		)	6,698
Corporate office	(13,942		)	(15,103		)	(14,449		)	(14,208		)	(14,950		)
	$	44,214		$	10,253		$	49,741		$	26,950		$	49,459
Equity in Earnings (Losses) of Affiliates, Net	2,579			649			1,331			(532		)	(4,697		)
Interest Expense, Net	(6,699		)	(6,766		)	(7,862		)	(7,758		)	(4,919		)
Non-Operating Pension and Postretirement Benefit Income, Net	21,386			18,801			18,620			17,621			17,657
Loss on Marketable Equity Securities, Net	(14,102		)	—			—			—			—
Other Income (Expense), Net	9,187			849			4,069			1,963			(2,640		)
Income Before Income Taxes	$	56,565		$	23,786		$	65,899		$	38,244		$	54,860
Depreciation of Property, Plant and Equipment
Education	$	7,606		$	8,584		$	8,325		$	8,085		$	7,912
Television broadcasting	3,071			2,594			2,991			3,118			3,476
Healthcare	653			1,069			1,194			1,166			1,154
Other businesses	3,059			2,115			3,070			3,354			3,184
Corporate office	253			290			291			279			258
	$	14,642		$	14,652		$	15,871		$	16,002		$	15,984
Amortization of Intangible Assets and Impairment of Goodwill and Other Long-Lived Assets
Education	$	1,149		$	1,120		$	1,323		$	1,355		$	1,364
Television broadcasting	1,408			902			970			1,071			3,406
Healthcare	1,808			1,654			1,644			2,420			2,187
Other businesses	6,019			3,160			15,818			6,389			6,018
Corporate office	—			—			—			—			—
	$	10,384		$	6,836		$	19,755		$	11,235		$	12,975
Pension Expense
Education	$	2,664		$	2,706		$	2,153		$	2,430		$	2,431
Television broadcasting	493			493			479			485			485
Healthcare	122			166			166			166			167
Other businesses	289			317			249			277			282
Corporate office	1,372			1,232			1,544			1,233			1,226
	$	4,940		$	4,914		$	4,591		$	4,591		$	4,591

The following table summarizes annual financial information related to each of the Company's business segments:


	Three Months Ended March 31
(in thousands)	2017			2016			2017			2016
Operating Revenues
Education	$	372,897		$	401,076		$	1,516,776		$	1,598,461
Television broadcasting	91,496			92,018			409,916			409,718
Healthcare							154,202			146,962
Other businesses	118,324			108,716			511,003			326,888
Corporate office	—			—			—			—
Intersegment elimination	—			(70		)	(51		)	(139		)
	$	582,717		$	601,740		$	2,591,846		$	2,481,890
Income (Loss) from Operations
Education	$	9,031		$	14,488		$	77,687		$	95,321
Television broadcasting	25,969			41,220			139,258			202,863
Healthcare							(2,569		)	2,799
Other businesses	(10,564		)	(5,730		)	(19,263		)	(24,901		)
Corporate office	4,618			1,894			(58,710		)	(53,213		)
	$	29,054		$	51,872		$	136,403		$	222,869
Equity in Earnings of Affiliates, Net	649			1,004
Equity in Losses of Affiliates, Net							(3,249		)	(7,937		)
Interest Expense, Net	(6,766		)	(7,357		)	(27,305		)	(32,297		)
Other Income, Net	849			15,096
Non-Operating Pension and Postretirement Benefit Income, Net							72,699			80,665
Other Income (Expense), Net							4,241			(12,642		)
Income Before Income Taxes	$	23,786		$	60,615		$	182,789		$	250,658
Depreciation of Property, Plant and Equipment
Education	$	8,584		$	11,103		$	32,906		$	41,187
Television broadcasting	2,594			2,377			12,179			9,942
Healthcare							4,583			2,805
Other businesses	3,184			3,027			11,723			9,570
Corporate office	290			254			1,118			1,116
	$	14,652		$	16,761		$	62,509		$	64,620
Amortization of Intangible Assets
Amortization of Intangible Assets and Impairment of Goodwill and Other Long-Lived Assets
Education	$	1,120		$	1,681		$	5,162		$	7,516
Television broadcasting	902			63			6,349			251
Healthcare							7,905			6,701
Other businesses	4,814			4,518			31,385			13,806
Corporate office	—			—			—			—
	$	6,836		$	6,262		$	50,801		$	28,274
Net Pension (Credit) Expense
Pension Expense
Education	$	2,706		$	3,109		$	9,720		$	11,803
Television broadcasting	493			439			1,942			1,714
Healthcare							665			—
Other businesses	483			254			1,125			1,118
Corporate office	(18,370		)	(15,861		)	5,235			5,826
	$	(14,688	)	$	(12,059	)	$	18,687		$	20,461

Asset information for the Company’s business segments are as follows:


					As of
	As of				March 31,		December 31,
(in thousands)	March 31, 2017		December 31, 2016		2018		2017
Identifiable Assets
Education	$	1,475,285	$	1,479,267	$	1,577,217	$	1,592,097
Television broadcasting	445,278		336,631		451,070		455,884
Healthcare					125,041		129,856
Other businesses	698,908		796,935		789,771		855,399
Corporate office	466,130		455,209		140,396		182,905
	$	3,085,601	$	3,068,042	$	3,083,495	$	3,216,141
Investments in Marketable Equity Securities	433,787		424,229		471,703		536,315
Investments in Affiliates	60,287		58,806		131,887		128,590
Prepaid Pension Cost	836,430		881,593		1,073,873		1,056,777
Total Assets	$	4,416,105	$	4,432,670	$	4,760,958	$	4,937,823

The following table summaries the quarterly financial information related to the operating segments of the Company’s education ~~division comprises~~division:



	Three Months Ended
	March 31,			March 31,			June 30,			September 30,			December 31,
(in thousands)	2018			2017			2017			2017			2017
Operating Revenues
Kaplan international	$	183,582		$	164,562		$	171,747		$	171,259		$	190,431
Higher education	99,830			111,111			111,840			105,210			103,264
Test preparation	59,151			64,568			75,730			72,680			60,320
Professional (U.S.)	33,356			33,199			27,364			28,249			27,027
Kaplan corporate and other	285			14			57			49			174
Intersegment elimination	(705		)	(557		)	(239		)	(642		)	(641		)
	$	375,499		$	372,897		$	386,499		$	376,805		$	380,575
Income (Loss) from Operations
Kaplan international	$	20,404		$	7,707		$	15,954		$	5,348		$	22,614
Higher education	1,355			2,446			13,140			1,493			(360		)
Test preparation	521			(2,864		)	5,741			7,330			1,300
Professional (U.S.)	9,315			10,158			4,571			7,316			5,513
Kaplan corporate and other	(8,895		)	(8,063		)	(6,045		)	(7,631		)	(8,124		)
Intersegment elimination	—			53			(30		)	(59		)	179
	$	22,700		$	9,437		$	33,331		$	13,797		$	21,122
Depreciation of Property, Plant and Equipment
Kaplan international	$	3,974		$	3,682		$	3,609		$	3,780		$	3,821
Higher education	1,858			2,648			2,484			2,010			1,975
Test preparation	978			1,341			1,332			1,407			1,206
Professional (U.S.)	642			783			765			758			735
Kaplan corporate and other	154			130			135			130			175
	$	7,606		$	8,584		$	8,325		$	8,085		$	7,912
Amortization of Intangible Assets	$	1,149		$	1,120		$	1,323		$	1,355		$	1,364
Pension Expense
Kaplan international	$	83		$	87		$	87		$	24		$	66
Higher education	1,406			1,742			1,742			467			1,318
Test preparation	729			911			911			244			689
Professional (U.S.)	290			302			302			81			228
Kaplan corporate and other	156			(336		)	(889		)	1,614			130
	$	2,664		$	2,706		$	2,153		$	2,430		$	2,431

The following table summarizes annual financial information related to the ~~following operating~~reportable segments of the Company's education division segments:

Item 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition.

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

Results of Operations

The Company reported net income attributable to common shares of $42.9 million ($7.78 per share) for the first quarter of 2018, compared to $21.1 million ($3.75 per share) for the first quarter of ~~2017, compared to $37.8 million ($6.59 per share)~~2017.

Items included in the Company’s net income for the first quarter of ~~2016.~~2018:

a $4.3 million gain on the Kaplan University Transaction (after-tax impact of $1.8 million, or $0.33 per share);

$14.1 million in net losses on marketable equity securities (after-tax impact of $10.7 million, or $1.94 per share);

$0.2 million in non-operating foreign currency gains (after-tax impact of $0.1 million, or $0.02 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 the first quarter of 2017:

$1.7 million in non-operating foreign currency gains ~~(after-tax impact of $1.1 million, or $0.19 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 the first quarter of 2016:~~

an ~~$18.9 million~~ ~~non-operating gain arising from the sale of a business (after-tax impact of~~ ~~$11.9 million, or~~ ~~$2.08~~ ~~per share);~~

a ~~$1.8 million~~ ~~gain on sale of marketable equity securities~~ (after-tax impact of $1.1 million, or $0.19 per share); and

$~~5.4~~5.9 million in ~~non-operating foreign currency losses (after-tax impact of $3.4 million, or $0.60~~income tax benefits related to stock compensation ($1.06 per share).

Revenue for the first quarter of ~~2017~~2018 was ~~$582.7~~$659.4 million, ~~down 3%~~up 13% from ~~$601.7~~$582.7 million in the first quarter of ~~2016. Revenues declined~~2017. The revenue increase is due largely to growth at the ~~education and~~ television broadcasting ~~divisions, offset by an increase in other~~and manufacturing businesses. The Company reported operating income of ~~$29.1~~$44.2 million for the first quarter of ~~2017,~~2018, compared to ~~$51.9~~$10.3 million for the first quarter of ~~2016.~~2017. The operating income ~~decline~~increase is driven by ~~lower~~higher earnings at the education, television broadcasting ~~division largely due~~and manufacturing businesses.

Education division revenue totaled ~~$372.9~~$375.5 million for the first quarter of ~~2017, down 7%~~2018, up 1% from ~~revenue of $401.1~~$372.9 million for the same period of ~~2016.~~2017. Kaplan reported operating income of ~~$9.0~~$22.7 million for the first quarter of ~~2017,~~2018, compared to ~~$14.5~~$9.4 million for the first quarter of ~~2016.~~2017.

KHE includes Kaplan’s domestic postsecondary education businesses, made up of fixed-facility colleges and online postsecondary and career programs. KHE also includes the domestic professional and other continuing education businesses.

In the first quarter of 2017, KHE revenue was down 13%, due to declines in average enrollments at Kaplan University, offset by increased revenues at the domestic professional and other continuing education businesses. KHE operating results declined in the first quarter of 2017 due primarily to lower enrollment at Kaplan University.

New higher education student enrollments at Kaplan University were up 2% in the first quarter of 2017; however, total students at Kaplan University were 32,536 at March 31, 2017, down 13% from March 31, 2016.



	Three Months Ended
	March 31
(in thousands)	2018			2017			% Change
Revenue
Kaplan international	$	183,582		$	164,562		12
Higher education	99,830			111,111			(10	)
Test preparation	59,151			64,568			(8	)
Professional (U.S.)	33,356			33,199			—
Kaplan corporate and other	285			14			—
Intersegment elimination	(705		)	(557		)	—
	$	375,499		$	372,897		1
Operating Income (Loss)
Kaplan international	$	20,404		$	7,707		—
Higher education	1,355			2,446			(45	)
Test preparation	521			(2,864		)	—
Professional (U.S.)	9,315			10,158			(8	)
Kaplan corporate and other	(7,746		)	(6,943		)	(12	)
Amortization of intangible assets	(1,149		)	(1,120		)	(3	)
Intersegment elimination	—			53			—
	$	22,700		$	9,437		—

Kaplan International includes English-language programs, and postsecondary education and professional training businesses largely outside the United States. In January and February 2016, Kaplan acquired Mander Portman Woodward, a leading provider of high-quality, bespoke education to UK and international students in London, Cambridge and Birmingham; and Osborne Books, an education publisher of learning resources for accounting qualifications in the UK.

Kaplan International revenue ~~declined~~increased 12% for the first quarter; 3% ~~for~~on a constant currency basis. Operating income increased to $20.4 million in the first quarter of ~~2017; on a constant currency basis, revenue increased 4% primarily due~~2018, compared to ~~growth in Pathways enrollments. Operating income increased~~$7.7 million in the first quarter of 2017 due to improved results at Pathways, UK Professional, MPW and English-language.

In the first quarter of 2018, Higher Education revenue was down 10% and operating results declined, due largely to the sale of KU on March 22, 2018 and fewer average enrollments at KU prior to the sale.

Kaplan Test Preparation (KTP) includes Kaplan’s standardized test preparation programs. KTP revenue declined 8% for the first quarter of 2018 due to the disposition of Dev Bootcamp, which made up the majority of KTP's new economy skills training programs, and soft enrollments in certain preparation programs. In comparison to 2017, KTP operating results improved ~~Pathways~~in the first quarter of 2018, due mostly to decreased losses from the new economy skills training programs. Operating losses for the new economy skills training programs were $0.5 million and ~~English-language~~$3.8 million for the first three months of 2018 and 2017, respectively. Dev Bootcamp was closed in the second half of 2017.

Kaplan Professional (U.S.) includes the domestic professional and other continuing education businesses. In the first quarter of 2018, Kaplan Professional (U.S.) revenue was even with the first quarter of 2017, while operating results ~~partially offset by a decline in Singapore.~~declined 8%, due to increased spending on sales and technology.

Kaplan corporate and other represents unallocated expenses of Kaplan, Inc.’s corporate office, other minor businesses and certain shared activities.

~~In the first quarter of 2016, Kaplan sold Colloquy, which was a part of Kaplan corporate and other, for a gain of $18.9 million that is included in other non-operating income.~~

Revenue at the television broadcasting division ~~decreased 1%~~increased 19% to ~~$91.5~~$108.8 million in the first quarter of ~~2017,~~2018, from ~~$92.0~~$91.5 million in the same period of ~~2016. Excluding revenue from the two newly acquired stations, revenue declined 6%~~2017 due primarily to ~~a $4.2~~$8.6 million ~~decrease~~ in ~~political~~2018 incremental winter Olympics-related advertising revenue ~~and lower network revenue, offset by $2.9 million in higher retransmission revenues. As previously disclosed,~~at 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~~an $8.2 million increase in ~~network fees in 2017, compared to 2016.~~retransmission revenues. Operating income for the first quarter of ~~2017 decreased 37%~~2018 increased 53% to ~~$26.0~~$40.5 million, from ~~$41.2~~$26.5 million in the same period of ~~2016~~2017 due to ~~the significantly~~ higher ~~network fees and lower~~ revenues. The Company's television broadcasting ~~division~~ stations ~~are operating~~operate under a ~~new~~ retransmission contract with Comcast that was effective on April 1, 2017.

The 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 increased 2% in the first three months of 2018, while operating results were down, due largely to continued integration costs.

Manufacturing includes ~~three~~four businesses: Dekko, a 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. In September 2016, Dekko acquired Electri-Cable Assemblies (ECA), a Shelton, CT-based manufacturer of power, data~~applications; and ~~electrical solutions for the office furniture industry.~~

~~Manufacturing revenues and operating income increased in the first three months of 2017 due to growth and improved results at Dekko, including the ECA acquisition.~~

~~The Graham Healthcare Group (GHG) provides home health and hospice services in three states. In June 2016,~~applications that the Company acquired ~~the outstanding 20% redeemable noncontrolling interest~~ in ~~Residential Healthcare (Residential). Also in June 2016, Celtic Healthcare (Celtic)~~April 2017.

SocialCode is a provider of marketing solutions on social, mobile and video platforms. SocialCode ~~revenues~~revenue increased ~~18%~~6% in the first quarter of ~~2017,~~2018 due to ~~continued~~ growth in digital advertising service revenues. SocialCode reported operating losses of ~~$4.5 million for the first quarter of 2017, compared to $3.0~~$3.8 million in the first quarter of ~~2016.~~2018, compared to $4.5 million in the first quarter of 2017.



Delaware	53-0182885
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1300 North 17th Street, Arlington, Virginia	22209
(Address of principal executive offices)	(Zip Code)



PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements

	a. Condensed Consolidated Statements of Operations (Unaudited) for the Three Months Ended March 31, ~~2017~~2018 and ~~2016~~2017	1

	b. Condensed Consolidated Statements of Comprehensive Income (Unaudited) for the Three Months Ended March 31, ~~2017~~2018 and ~~2016~~2017	2

	c. Condensed Consolidated Balance Sheets at March 31, ~~2017~~2018 (Unaudited) and December 31, ~~2016~~2017	3

	d. Condensed Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended March 31, ~~2017~~2018 and ~~2016~~2017	4

	e. Notes to Condensed Consolidated Financial Statements (Unaudited)	5

Item 2.	Management’s Discussion and Analysis of Results of Operations and Financial Condition	1928

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	2635

Item 4.	Controls and Procedures	2635

PART II. OTHER INFORMATION

Item 1A.	Risk Factors	2636

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2736

Item 6.	Exhibits	2837

Signatures		2938


	Three Months Ended March 31						Three Months Ended March 31

(in thousands, except per share amounts)	2017			2016			2018			2017
Operating Revenues							659,436			582,717
Education	$	372,975		$	401,006
Advertising	64,116			68,158
Other	145,626			132,576
	582,717			601,740
Operating Costs and Expenses
Operating	300,666			291,632			365,151			325,687
Selling, general and administrative	231,509			235,213			225,045			225,289
Depreciation of property, plant and equipment	14,652			16,761			14,642			14,652
Amortization of intangible assets	6,836			6,262			10,384			6,836
	553,663			549,868			615,222			572,464
Income from Operations	29,054			51,872			44,214			10,253
Equity in earnings of affiliates, net	649			1,004			2,579			649
Interest income	1,363			591			1,372			1,363
Interest expense	(8,129		)	(7,948		)	(8,071		)	(8,129		)
Non-operating pension and postretirement benefit income, net							21,386			18,801
Loss on marketable equity securities, net							(14,102		)	—
Other income, net	849			15,096			9,187			849
Income Before Income Taxes	23,786			60,615			56,565			23,786
Provision for Income Taxes	2,700			22,400			13,600			2,700
Net Income	21,086			38,215			42,965			21,086
Net Income Attributable to Noncontrolling Interests	—			(435		)	(74		)	—
Net Income Attributable to Graham Holdings Company Common Stockholders	$	21,086		$	37,780		$	42,891		$	21,086
Per Share Information Attributable to Graham Holdings Company Common Stockholders
Basic net income per common share	$	3.77		$	6.63		$	7.84		$	3.77
Basic average number of common shares outstanding	5,535			5,623			5,436			5,535
Diluted net income per common share	$	3.75		$	6.59		$	7.78		$	3.75
Diluted average number of common shares outstanding	5,569			5,652			5,473			5,569


	Three Months Ended March 31						Three Months Ended March 31
(in thousands)	2017			2016			2018			2017
Net Income	$	21,086		$	38,215		$	42,965		$	21,086
Other Comprehensive Income, Before Tax
Foreign currency translation adjustments:
Translation adjustments arising during the period	13,668			3,845			11,564			13,668
Unrealized gains (losses) on available-for-sale securities:
Unrealized gains on available-for-sale securities:
Unrealized gains for the period, net	9,558			343			—			9,558
Reclassification of realized gain on sale of available-for-sale securities included in net income	—			(1,754		)
	9,558			(1,411		)
Pension and other postretirement plans:
Amortization of net prior service cost included in net income	120			104			76			120
Amortization of net actuarial (gain) loss included in net income	(1,823		)	290
Amortization of net actuarial gain included in net income							(1,367		)	(1,823		)
	(1,703		)	394			(1,291		)	(1,703		)
Cash flow hedge loss	(124		)	—
Cash flow hedge gain (loss)							236			(124		)
Other Comprehensive Income, Before Tax	21,399			2,828			10,509			21,399
Income tax (expense) benefit related to items of other comprehensive income	(3,117		)	407
Income tax benefit (expense) related to items of other comprehensive income							303			(3,117		)
Other Comprehensive Income, Net of Tax	18,282			3,235			10,812			18,282
Comprehensive Income	39,368			41,450			53,777			39,368
Comprehensive income attributable to noncontrolling interests	—			(435		)	(74		)	—
Total Comprehensive Income Attributable to Graham Holdings Company	$	39,368		$	41,015		$	53,703		$	39,368


	As of						As of
(in thousands)	March 31, 2017			December 31, 2016			March 31, 2018			December 31, 2017
	(Unaudited)						(Unaudited)
Assets
Current Assets
Cash and cash equivalents	$	632,787		$	648,885		$	315,789		$	390,014
Restricted cash	24,555			21,931			12,396			17,552
Investments in marketable equity securities and other investments	456,558			448,241			491,449			557,153
Accounts receivable, net	493,804			615,101			540,593			620,319
Income taxes receivable	47,734			41,635			5,304			23,901
Inventories and contracts in progress	35,736			34,818			66,949			60,612
Other current assets	68,717			60,735			88,956			66,253
Total Current Assets	1,759,891			1,871,346			1,521,436			1,735,804
Property, Plant and Equipment, Net	243,330			233,664			258,694			259,358
Investments in Affiliates	60,287			58,806			131,887			128,590
Goodwill, Net	1,179,431			1,122,954			1,301,484			1,299,710
Indefinite-Lived Intangible Assets, Net	93,203			66,026
Indefinite-Lived Intangible Assets							103,916			102,195
Amortized Intangible Assets, Net	153,924			107,939			230,674			237,976
Prepaid Pension Cost	836,430			881,593			1,073,873			1,056,777
Deferred Income Taxes	15,818			17,246			15,367			15,367
Deferred Charges and Other Assets	73,791			73,096			123,627			102,046
Total Assets	$	4,416,105		$	4,432,670		$	4,760,958		$	4,937,823

Liabilities and Equity
Current Liabilities
Accounts payable and accrued liabilities	$	444,677		$	500,726		$	435,498		$	526,323
Deferred revenue	321,058			312,107			294,519			339,454
Income taxes payable							8,593			6,109
Current portion of long-term debt	6,158			6,128			406,654			6,726
Dividends declared	7,100			—			7,319			—
Total Current Liabilities	778,993			818,961			1,152,583			878,612
Postretirement Benefits Other Than Pensions	22,270			21,859			20,943			20,865
Accrued Compensation and Related Benefits	193,060			195,910			176,697			193,024
Other Liabilities	67,850			65,554			63,714			65,977
Deferred Income Taxes	373,534			379,092			356,018			362,701
Mandatorily Redeemable Noncontrolling Interest	12,584			12,584			10,331			10,331
Long-Term Debt	487,186			485,719			91,079			486,561
Total Liabilities	1,935,477			1,979,679			1,871,365			2,018,071
Redeemable Noncontrolling Interest	50			50			4,680			4,607
Preferred Stock	—			—			—			—
Common Stockholders’ Equity
Common stock	20,000			20,000			20,000			20,000
Capital in excess of par value	363,361			364,363			372,836			370,700
Retained earnings	5,595,826			5,588,942			6,022,315			5,791,724
Accumulated other comprehensive income (loss), net of tax
Cumulative foreign currency translation adjustment	(13,330		)	(26,998		)	17,878			6,314
Unrealized gain on available-for-sale securities	98,666			92,931			—			194,889
Unrealized gain on pensions and other postretirement plans	169,808			170,830			333,593			334,536
Cash flow hedge	(376		)	(277		)	7			(184		)
Cost of Class B common stock held in treasury	(3,753,377		)	(3,756,850		)	(3,881,716		)	(3,802,834		)
Total Equity	2,480,578			2,452,941			2,884,913			2,915,145
Total Liabilities and Equity	$	4,416,105		$	4,432,670		$	4,760,958		$	4,937,823



	Three Months Ended March 31, 2016
	As
	Previously					As
(in thousands)	Reported			Adjustment		Adopted
Cash Flows from Operating Activities
Decrease in Restricted Cash	$	(13,888	)	$	13,888	$	—
Net Cash Provided by Operating Activities	46,994			13,888		60,882

Net Decrease in Cash and Cash Equivalents and Restricted Cash	(223,620		)	13,888		(209,732		)
Cash and Cash Equivalents and Restricted Cash at Beginning of Year	754,207			20,745		774,952
Cash and Cash Equivalents and Restricted Cash at End of Year	530,587			34,633		565,220



	As Previously Reported		Adjustment			Upon Adoption
(in thousands)	As Previously Reported		Adjustment			Upon Adoption
Three Months Ended March 31, 2017
Operating expenses	$	300,666	$	25,021		$	325,687
Selling, general and administrative expenses	231,509		(6,220		)	225,289
Income from Operations	29,054		(18,801		)	10,253
Non-operating pension and postretirement benefit income, net	—		18,801			18,801
Income Before Income Taxes	23,786		—			23,786


	Purchase Price Allocation						Purchase Price Allocation
	As of						As of
(in thousands)	March 31, 2017			December 31, 2016			December 31, 2017
Accounts receivable	$	386		$	8,538		$	12,502
Other current assets	130			2,298
Inventory							25,253
Property, plant and equipment	8,960			3,940			29,921
Goodwill	42,632			184,118			143,149
Indefinite-lived intangible assets	26,600			53,110			33,800
Amortized intangible assets	53,307			28,267			170,658
Other assets							1,880
Pension and other postretirement benefits liabilities	(59,116		)	—			(59,116		)
Other liabilities	(1,217		)	(21,892		)	(12,177		)
Deferred income taxes	13,733			(11,009		)	(37,289		)
Redeemable noncontrolling interest							(3,666		)
Aggregate purchase price, net of cash acquired	$	85,415		$	247,370		$	304,915


(in thousands)	Education			Television Broadcasting		Other Businesses			Total			Education			Television Broadcasting		Healthcare		Other Businesses			Total
Balance as of December 31, 2016
Balance as of December 31, 2017
Goodwill	$	1,111,003		$	168,345	$	202,141		$	1,481,489		$	1,171,812		$	190,815	$	69,409	$	233,825		$	1,665,861
Accumulated impairment losses	(350,850		)	—		(7,685		)	(358,535		)	(350,850		)	—		—		(15,301		)	(366,151		)
	760,153			168,345		194,456			1,122,954			820,962			190,815		69,409		218,524			1,299,710
Acquisitions	20,851			21,781		—			42,632			963			—		—		—			963
Dispositions	—			—		(412		)	(412		)	(11,191		)	—		—		—			(11,191		)
Foreign currency exchange rate changes	14,257			—		—			14,257			12,002			—		—		—			12,002
Balance as of March 31, 2017
Balance as of March 31, 2018
Goodwill	1,146,111			190,126		201,729			1,537,966			1,153,887			190,815		69,409		233,825			1,647,936
Accumulated impairment losses	(350,850		)	—		(7,685		)	(358,535		)	(331,151		)	—		—		(15,301		)	(346,452		)
	$	795,261		$	190,126	$	194,044		$	1,179,431		$	822,736		$	190,815	$	69,409	$	218,524		$	1,301,484


(in thousands)	Higher Education			Test Preparation			Kaplan International		Total			Kaplan International		Higher Education			Test Preparation			Professional (U.S.)			Total
Balance as of December 31, 2016
Balance as of December 31, 2017
Goodwill	$	389,720		$	166,098		$	555,185	$	1,111,003		$	615,861	$	389,853		$	166,098		$	—		$	1,171,812
Accumulated impairment losses	(248,591		)	(102,259		)	—		(350,850		)	—		(248,591		)	(102,259		)	—			(350,850		)
	141,129			63,839			555,185		760,153			615,861		141,262			63,839			—			820,962
Reallocation, net (Note 16)												—		(66,791		)	—			66,791			—
Acquisitions	—			—			20,851		20,851			26		—			937			—			963
Dispositions												—		(11,191		)	—			—			(11,191		)
Foreign currency exchange rate changes	28			—			14,229		14,257			12,047		(40		)	—			(5		)	12,002
Balance as of March 31, 2017
Balance as of March 31, 2018
Goodwill	389,748			166,098			590,265		1,146,111			627,934		174,564			167,035			184,354			1,153,887
Accumulated impairment losses	(248,591		)	(102,259		)	—		(350,850		)	—		(111,324		)	(102,259		)	(117,568		)	(331,151		)
	$	141,157		$	63,839		$	590,265	$	795,261		$	627,934	$	63,240		$	64,776		$	66,786		$	822,736


		As of March 31, 2017						As of December 31, 2016							As of March 31, 2018						As of December 31, 2017
(in thousands)	Useful Life Range	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Useful Life Range	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Amortized Intangible Assets
Student and customer relationships	1–10 years (1)	$	131,975	$	60,389	$	71,586	$	129,616	$	55,863	$	73,753	2–10 years (1)	$	261,022	$	91,658	$	169,364	$	260,464	$	83,690	$	176,774
Trade names and trademarks	2–10 years	56,270		30,654		25,616		55,240		29,670		25,570		2–10 years	50,858		26,917		23,941		50,286		25,596		24,690
Network affiliation agreements	15 years	45,900		638		45,262		—		—		—		10 years	17,400		2,103		15,297		17,400		1,668		15,732
Databases and technology	3–5 years	9,051		4,565		4,486		5,601		4,368		1,233		3–6 years	21,988		5,929		16,059		19,563		5,008		14,555
Noncompete agreements	2–5 years	1,730		1,464		266		1,730		1,404		326		2–5 years	1,105		580		525		930		467		463
Other	1–8 years	12,030		5,322		6,708		12,030		4,973		7,057		1–8 years	13,430		7,942		5,488		13,430		7,668		5,762
		$	256,956	$	103,032	$	153,924	$	204,217	$	96,278	$	107,939		$	365,803	$	135,129	$	230,674	$	362,073	$	124,097	$	237,976
Indefinite-Lived Intangible Assets
Trade names and trademarks		$	65,953					$	65,192						$	84,966					$	82,745
FCC licenses		26,600						—							18,800						18,800
Licensure and accreditation		650						834							150						650
		$	93,203					$	66,026						$	103,916					$	102,195


(1)	~~The Company's~~As of December 31, 2017, the student and customer relationships’ minimum useful life was ~~2 years as of December 31, 2016.~~1 year.


(1)	The carrying value is net of ~~$0.1~~$0.4 million of unamortized debt issuance costs as of March 31, ~~2017~~2018 and December 31, ~~2016,~~2017, respectively.


~~(2)~~	~~The carrying value is net of $0.5 million of unamortized debt issuance costs as of March 31, 2017 and December 31, 2016, respectively.~~


(1)	The Company’s money market investments are included in ~~cash, cash equivalents~~Cash and ~~restricted cash~~Cash Equivalents and Restricted Cash and the value considers the liquidity of the counterparty.


5.	INVENTORIES AND CONTRACTS IN PROGRESS


(2)	The ~~Company's commercial paper investments with original maturities of three months or less are included in cash and cash equivalents.~~


~~(3)~~	~~The~~ Company’s investments in marketable equity securities are held in common shares of U.S. corporations that are actively traded on U.S. stock exchanges. Price quotes for these shares are readily available. Investments in marketable securities were classified as ~~available-for-sale.~~available-for-sale in 2017 prior to the adoption of the new accounting guidance (see Note 1).


~~(4)~~(3)	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 valuation hierarchy.


(4)	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.


(6)	Included in Other 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.


(7)	The fair value of the mandatorily redeemable noncontrolling interest is based on an EBITDA multiple, adjusted for working capital and other items, which approximates fair value.


(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			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
Balance as of December 31, 2016	$	(26,998	)	$	92,931	$	170,830		$	(277	)	$	236,486
Other comprehensive income (loss) before reclassifications	13,668			5,735		—			(124		)	19,279
Balance as of December 31, 2017															$	6,314	$	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 income before reclassifications															11,564		—			—			189			11,753
Net amount reclassified from accumulated other comprehensive income (loss)	—			—		(1,022		)	25			(997		)	—		—			(943		)	2			(941		)
Other comprehensive income (loss), net of tax	13,668			5,735		(1,022		)	(99		)	18,282			11,564		—			(943		)	191			10,812
Balance as of March 31, 2017	$	(13,330	)	$	98,666	$	169,808		$	(376	)	$	254,768
Balance as of March 31, 2018															$	17,878	$	—		$	333,593		$	7		$	351,478


	Three Months Ended March 31						Affected Line Item in the Condensed Consolidated Statement of Operations	Three Months Ended March 31						Affected Line Item in the Condensed Consolidated Statement of Operations
	Three Months Ended March 31							Three Months Ended March 31
(in thousands)	2017			2016				2018			2017
Unrealized Gains on Available-for-sale Securities:
Realized gain for the period	$	—		$	(1,754	)	Other income, net
	—			701			Provision for Income Taxes
	—			(1,053		)	Net of Tax
Pension and Other Postretirement Plans:
Amortization of net prior service cost	120			104			(1)	$	76		$	120		(1)
Amortization of net actuarial (gain) loss	(1,823		)	290			(1)
Amortization of net actuarial gain								(1,367		)	(1,823		)	(1)
	(1,703		)	394			Before tax	(1,291		)	(1,703		)	Before tax
	681			(157		)	Provision for Income Taxes	348			681			Provision for Income Taxes
	(1,022		)	237			Net of Tax	(943		)	(1,022		)	Net of Tax
Cash Flow Hedge
	31			—			Interest expense	3			31			Interest expense
	(6		)	—			Provision for Income Taxes	(1		)	(6		)	Provision for Income Taxes
	25			—			Net of Tax	2			25			Net of Tax
Total reclassification for the period	$	(997	)	$	(816	)	Net of Tax	$	(941	)	$	(997	)	Net of Tax


(1)	These accumulated other comprehensive income components are ~~included in the computation~~components of net periodic pension and postretirement plan cost (see Note ~~8).~~12) and are included in non-operating pension and postretirement benefit income in the Company's Condensed Consolidated Statements of Operations.



	As of March 31
	2017		2016
Certificate	8.7	%	5.8	%
Associate’s	17.7	%	22.1	%
Bachelor’s	51.0	%	50.5	%
Master’s	22.6	%	21.6	%
	100.0	%	100.0	%


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*	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*
January	—	$	—	—	224,276	2,102	$	564.03	2,102	470,576
February	750	526.90		—	223,526	—	—		—	470,576
March	—	—		—	223,526	129,478	600.99		129,478	341,098
	750	$	526.90	—		131,580	$	600.40	131,580



Exhibit Number	Description

2.1	Contribution and Transfer Agreement, dated April 27, 2017, by and among Kaplan Higher Education, LLC, Iowa College Acquisition, LLC, Purdue University, and Purdue New U, Inc. (incorporated by reference to the Company’s Current Report on Form 8-K filed April 27, 2017). *

3.1	Restated Certificate of Incorporation of the Company dated November 13, 2003 (incorporated by reference to Exhibit 3.1 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 28, 2003).

3.2	Certificate of Amendment, effective November 29, 2013, to the Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company’s current Report on Form 8-K dated November 29, 2013).

3.3	By-Laws of the Company as amended and restated through November 29, 2013 (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K dated November 29, 2013).

4.1	Second Supplemental Indenture dated January 30, 2009, between the Company and The Bank of New York Mellon Trust Company, N.A., as successor to The First National Bank of Chicago, as Trustee (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K dated January 30, 2009).

4.2	Five Year Credit Agreement, dated as of June 29, 2015, among the Company, and certain of its domestic subsidiaries as guarantors, the several lenders from time to time party thereto, Wells Fargo Bank, National Association, as Administrative Agent and JPMorgan Chase Bank, N.A., as Syndication Agent. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated June 29, 2015).

10.1	Transition and Operations Support Agreement, dated March 22, 2018, by and among Kaplan Higher Education, LLC, Iowa College Acquisition, LLC, and Purdue University Global, Inc., with Purdue University as a party to the Transition and Operations Support Agreement solely for the purposes of being bound by the Purdue Provisions (as defined therein) (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated March 22, 2018). **

31.1	Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer.

31.2	Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer.

32	Section 1350 Certification of the Chief Executive Officer and the Chief Financial Officer. ***

101	The following financial information from Graham Holdings Company Quarterly Report on Form 10-Q for the period ended March 31, ~~2017,~~2018, formatted in Extensible Business Reporting Language (XBRL): (i) Condensed Consolidated Statements of Operations for the Three Months Ended March 31, ~~2107~~2018 and ~~2016,~~2017, (ii) Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, ~~2017~~2018 and ~~2016,~~2017, (iii) Condensed Consolidated Balance Sheets as of March 31, ~~2017~~2018 and December 31, ~~2016,~~2017, (iv) Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, ~~2017~~2018 and ~~2016,~~2017, and (v) Notes to Condensed Consolidated Financial Statements. Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed ~~“furnished”~~"furnished" and not ~~“filed”~~"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”~~"furnished" and not ~~“filed”~~"filed" for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise are not subject to liability under these sections.


*	Graham Holdings Company hereby undertakes to furnish supplementally a copy of any omitted exhibit or schedule to such agreement to the U.S. Securities and Exchange Commission upon request.


**	Select portions of this exhibit have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.



		GRAHAM HOLDINGS COMPANY
		(Registrant)

Date: May ~~3, 2017~~2, 2018		/s/ Timothy J. ~~O'Shaughnessy~~O’Shaughnessy
		Timothy J. O’Shaughnessy, President & Chief Executive Officer (Principal Executive Officer)

Date: May ~~3, 2017~~2, 2018		/s/ Wallace R. Cooney
		Wallace R. Cooney, ~~Senior Vice President-Finance~~Chief Financial Officer (Principal Financial Officer)