Graham Holdings Co

INDEX TO EXHIBITS

*A management contract or compensatory plan or arrangement required to be included as an exhibit hereto pursuant to Item 15(b) of Form 10-K.

**Graham Holdings Company hereby undertakes to furnish supplementally a copy of any omitted exhibit or schedule to such agreement to the SEC upon request.

• Select portions of this exhibit have been omitted pursuant to a request for confidential treatment and have been filed separately with the SEC.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on February 23, 2024.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on February 23, 2024:

An original power of attorney authorizing Timothy J. O’Shaughnessy, Wallace R. Cooney and Nicole M. Maddrey, and each of them, to sign all reports required to be filed by the Registrant pursuant to the Securities Exchange Act of 1934 on behalf of the above-named directors and officers has been filed with the Securities and Exchange Commission.

INDEX TO FINANCIAL INFORMATION

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

MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

This analysis should be read in conjunction with the Consolidated Financial Statements and the notes thereto. Refer to Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Graham Holdings Company’s 2022 Annual Report on Form 10-K for management’s discussion and analysis of financial condition and results of operations for the year ended December 31, 2022 compared to the year ended December 31, 2021.

OVERVIEW

Graham Holdings Company (the Company) is a diversified holding company whose operations include educational services, television broadcasting, manufacturing, healthcare and automotive dealerships. The Company has seven reportable segments and a group of companies that make up Other Businesses. The Company’s business units are diverse and subject to different trends and risks.

Education is the largest operating division of the Company, making up 36% of the Company’s consolidated revenues in 2023. Through its subsidiary Kaplan, Inc., the Company provides extensive worldwide education services for individuals, schools and businesses. The Company has devoted significant resources and attention to this division for many years, given its geographic and product diversity, the investment opportunities and growth prospects during this time, and challenges related to government regulation. Kaplan is organized into the following three operating segments: Kaplan International, Kaplan Higher Education (KHE) and Supplemental Education.

Kaplan International reported revenue growth for 2023 due largely to increases at Pathways, Australia, Languages and UK Professional, partially offset by a decline at Singapore. Kaplan International operating results increased in 2023 due to improved results at Australia, Pathways and Languages, partially offset by a decline at UK Professional. KHE revenue and operating results increased in 2023 due to an increase in the Purdue University Global (Purdue Global) fee recorded. Supplemental Education revenues declined in 2023 due to lower demand for graduate and pre-college test preparation programs, while demand for professional programs remained stable; operating results improved in 2023 due to savings from reduced headcount.

The Company’s second largest business is television broadcasting. The Company’s television broadcasting division reported lower revenues and operating income in 2023, due largely to a significant reduction in political advertising revenue from the 2022 election cycle. Retransmission revenues, net of network fee expense, trended down modestly in 2023 with this trend expected to continue in the future due largely to adverse subscriber trends from cord cutting. In recent years, the television broadcasting division has consistently generated significantly higher operating income amounts and operating income margins than the education division and the Company’s other reporting segments.

The Company’s manufacturing division has provided meaningful operating cash flow over the last few years, although revenues and operating results at Dekko have been adversely impacted by lower product demand, particularly in the commercial office electrical products sector. Graham Healthcare Group (GHG) has grown substantially over the last few years and provided meaningful operating cash flow from acquisitions and internal growth. GHG has expanded from its home health and hospice operations into new lines of business, largely from significant growth at CSI Pharmacy Holding Company, LLC (CSI), which provides nursing care and prescription services for patients receiving in-home infusion treatments. Automotive revenues, operating income and operating cash flow grew in 2023 due to acquisitions, internal growth and a favorable operating environment.

The Company’s other businesses include several investment stage businesses as well as investments into new lines of business over the last few years. In total, there are ten operating business units that make up this group in three categories: retail, media and specialty. The largest of these businesses from a revenue standpoint is Clyde’s Restaurant Group (CRG), followed by the combined three former Leaf businesses, and then Framebridge, a custom framing service company. In 2023, CRG, Slate and Foreign Policy each reported positive operating income, while the other businesses each reported operating losses, which were significant at the combined three former Leaf businesses and Framebridge.

The Company generates a significant amount of cash from its businesses that is used to support its operations, pay down debt and fund capital expenditures, share repurchases, dividends, acquisitions and other investments.

Net income attributable to common shares was $205.3 million ($43.82 per share) for the year ended December 31, 2023, compared to $67.1 million ($13.79 per share) for the year ended December 31, 2022.

Items included in the Company’s net income for 2023 are listed below:

•a $7.0 million net credit related to fair value changes in contingent consideration from prior acquisitions (after-tax impact of $6.5 million, or $1.38 per share);

•$99.1 million in goodwill and other long-lived asset impairment charges (after-tax impact of $88.9 million, or $18.97 per share);

•$9.9 million in expenses related to non-operating Separation Incentive Programs (SIPs) at other businesses and the education and television broadcasting divisions (after-tax impact of $7.3 million, or $1.57 per share);

•$138.1 million in net gains on marketable equity securities (after-tax impact of $102.7 million, or $21.93 per share);

•$16.0 million in net losses of affiliates whose operations are not managed by the Company (after-tax impact of $11.9 million, or $2.53 per share);

•a non-operating gain of $10.0 million on the sale of Pinna (after-tax impact of $7.4 million, or $1.59 per share);

•Non-operating gains, net, of $3.4 million from write-ups, sales and impairments of cost method investments (after-tax impact of $2.5 million, or $0.54 per share);

•a $4.6 million credit to interest expense resulting from gains realized related to the termination of interest rate swaps (after-tax impact of $3.3 million, or $0.72 per share); and

•$10.1 million in interest expense to adjust the fair value of the mandatorily redeemable noncontrolling interest (after-tax impact of $9.6 million, or $2.05 per share).

Items included in the Company’s net income for 2022 are listed below:

•a $6.1 million net credit related to fair value changes in contingent consideration from prior acquisitions (after-tax impact of $6.1 million or $1.25 per share);

◦$129.0 million in goodwill and other long-lived asset impairment charges (after-tax impact of $117.0 million, or $24.06 per share) recorded in the fourth quarter;

◦$3.6 million in expenses related to a non-operating SIP at the education division (after-tax impact of $2.7 million, or $0.56 per share) recorded in the fourth quarter;

◦$139.6 million in net losses on marketable equity securities (after-tax impact of $102.8 million, or $21.14 per share);

◦$11.8 million in net losses of affiliates whose operations are not managed by the Company (after-tax impact of $8.7 million, or $1.79 per share);

•a fourth quarter gain of $18.4 million on the sale of CyberVista (after-tax impact of $13.5 million, or $2.78 per share);

•Non-operating gains, net, of $9.5 million from write-ups, sales and impairments of cost and equity method investments (after-tax impact of $7.1 million, or $1.45 per share); and

◦$16.5 million in interest expense to adjust the fair value of the mandatorily redeemable noncontrolling interest (after-tax impact of $15.4 million, or $3.17 per share).

Revenue for 2023 was $4,414.9 million, up 12% from $3,924.5 million in 2022. Revenues increased at education, healthcare and automotive, partially offset by declines at television broadcasting, manufacturing and other businesses. Operating costs and expenses for the year increased to $4,345.5 million in 2023, from $3,840.6 million in 2022. Expenses in 2023 increased at education, television broadcasting, manufacturing, healthcare and automotive, partially offset by a decrease at other businesses. The Company reported operating income for 2023 of $69.4 million, compared to $83.9 million in 2022. The decrease in operating results is due to goodwill impairment charges at World of Good Brands (WGB, formerly Leaf Media) and Dekko and declines at television broadcasting and manufacturing, partially offset by increases at education, healthcare and automotive, and reduced losses at other businesses due to goodwill and other long-lived asset impairment charges in 2022 at Society6 and Saatchi Art (both formerly included in Leaf Marketplace).

Division Results

Education

Education division revenue in 2023 totaled $1,587.6 million, up 11% from $1,427.9 million in 2022. Kaplan reported operating income of $104.5 million for 2023, an increase from $82.9 million in 2022.

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

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

Kaplan International includes postsecondary education, professional training and language training businesses largely outside the United States. Kaplan International revenue increased 18% in 2023(18% on a constant currency basis). The increase in 2023 is due largely to growth at Pathways, Australia, Languages and UK Professional, partially offset by a decline at Singapore. Kaplan International reported operating income of $87.5 million in 2023, compared to $72.1 million in 2022. The increase is due largely to improved results at Australia, Pathways and Languages, partially offset by a decline at UK Professional.

Higher Education includes the results of Kaplan as a service provider to higher education institutions. Higher Education revenue increased 5% in 2023 due largely to an increase in the Purdue Global fee recorded. In 2023 and 2022, Kaplan recorded a portion of the fee with Purdue Global based on an assessment of its collectability under the TOSA. Enrollments at Purdue Global for 2023 finished 4% higher compared with the end of 2022. The Company will continue to assess the collectability of the fee with Purdue Global on a quarterly basis to make a determination as to whether to record all or part of the fee in the future and whether to make adjustments to fee amounts recognized in earlier periods. During 2023 and 2022, Kaplan recorded $50.3 million and $38.9 million, respectively, in fees from Purdue Global in its Higher Education operating results. Higher Education results improved in 2023 due to an increase in the Purdue Global fee recorded and improved results from other higher education development programs.

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

In the fourth quarter of 2022, Kaplan implemented a SIP to reduce the number of employees at Supplemental Education and Higher Education, which was funded by the assets of the Company’s pension plan. In connection with the SIP, the Company recorded $3.6 million in non-operating pension expense in the fourth quarter of 2022.

Kaplan corporate and other represents unallocated expenses of Kaplan, Inc.’s corporate office, other minor businesses and certain shared activities. Overall, Kaplan corporate and other expenses increased in 2023 due to higher incentive compensation costs compared to 2022.

Television Broadcasting

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

Graham Media Group, Inc. (GMG) owns seven television stations located in Houston, TX; Detroit, MI; Orlando, FL; San Antonio, TX; Jacksonville, FL; and Roanoke, VA, as well as SocialNewsDesk, a provider of social media management tools designed to connect newsrooms with their users. Revenue at the television broadcasting division decreased 12% to $472.4 million in 2023, from $535.7 million in 2022. The revenue decline is due primarily to a$57.8 million decline in political advertising revenue. The revenue decline is also due to winter Olympics and Super Bowl advertising revenue at the Company’s NBC affiliates in the first quarter of 2022, as well asa small decline in retransmission revenues. Operating income for 2023 declined 34% to $133.9 million, from $201.9 million in 2022, due to reduced revenues and higher network fees. While per subscriber rates from cable, satellite and OTT providers have grown, overall cable and satellite subscribers are down due to cord cutting, resulting in retransmission revenue net of network fees in 2023 to be down modestly compared with 2022, and this trend is expected to continue in the future. Operating margin at the television broadcasting division was 28% in 2023 and 38% in 2022.

GMG's media hubs continued to sustain their competitiveness among local news stations in their respective markets. In the traditional broadcasting space, KSAT in San Antonio and WJXT in Jacksonville wrapped up the year with top-rated news broadcasts at 6 a.m., 6 p.m., and late evenings within the crucial 25-54 demographic. Throughout 2023, KPRC in Houston secured a strong second-place position in morning, evening, and late newscasts. Similarly, WDIV in Detroit achieved the top-rated news broadcast at 6 p.m. and secured a second-place finish in both 6 a.m. and 11 p.m. newscasts. At 11 p.m., WKMG delivered its most competitive performance among their key newscasts, securing a third-place finish. Additionally, the 6 a.m. and 6 p.m. newscasts claimed the fourth position in the Orlando market. In Roanoke, WSLS delivered a third-place finish at 6 a.m., 6 p.m. and 11 p.m. On the digital front, GMG's streaming platforms reported sustained growth in live stream hours watched. GMG's Insider membership registrations maintained an upward trajectory, and the local media sites concluded another year as the leading local media platforms in their respective markets.

Manufacturing

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

Manufacturing includes four businesses: Hoover, a supplier of pressure impregnated kiln-dried lumber and plywood products for fire retardant and preservative applications; Dekko, a manufacturer of electrical workspace solutions, architectural lighting and electrical components and assemblies; Joyce/Dayton, a manufacturer of screw jacks and other linear motion systems; and Forney, a global supplier of products and systems that control and monitor combustion processes in electric utility and industrial applications.

Manufacturing revenues decreased 8% in 2023 due to lower revenues at Hoover and Dekko, partially offset by increased revenues at Joyce and Forney. The revenue decline in 2023 at Hoover is due to lower wood prices and a decrease in overall product demand, partially offset by increased rates. Revenues declined at Dekko due largely to lower product demand, particularly in the commercial office electrical products sector. Overall, Hoover results included wood gains on inventory sales in 2023 and 2022, with gains in 2023 higher than the prior year. Manufacturing operating results declined in 2023 due primarily to a $47.8 million goodwill impairment charge at Dekko, resulting from continued sustained weakness in demand for certain Dekko power and data products, primarily in the commercial office sector. Excluding the impairment charge at Dekko, manufacturing results were down in 2023, due to declines at Dekko, partially offset by improved results at Hoover, Joyce and Forney. Excluding the impact of wood gains and losses, Hoover results were down modestly in 2023.

Healthcare

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

GHG provides home health and hospice services in seven states. GHG also provides other healthcare services, including nursing care and prescription services for patients receiving in-home infusion treatments through its 86.7% interest in CSI. In May 2022, GHG acquired two small businesses, one of which expanded GHG’s home health operations into Kansas and Missouri. In July 2022, GHG acquired a 100% interest in a multi-state provider of Applied Behavior Analysis clinics and in August 2022, GHG acquired two small businesses, which expanded GHG’s hospice services into Missouri and Ohio. Healthcare revenues increased 41% in 2023, largely due to significant growth at CSI and from businesses acquired in 2022, along with growth in home health and hospice services.

In January 2022, GHG implemented a pension credit retention program in order to improve employee retention and utilize the Company’s surplus pension assets. The GHG program offers a pension credit up to $50,000 per employee, cliff vested after three years of continuous employment for certain existing employees and new employees. GHG recorded pension expense of $13.5 million and $10.5 million related to this program in 2023 and 2022, respectively.

The improvement in GHG operating results in 2023 is due largely to improved results at CSI and in home health and hospice, partly offset by increased net losses from newly acquired businesses.

The Company also holds interests in four home health and hospice joint ventures managed by GHG, whose results are included in equity in earnings of affiliates in the Company’s Consolidated Statements of Operations. In 2023 and 2022, the Company recorded equity in earnings of $9.9 million and $8.1 million, respectively, from these joint ventures. During the first quarter of 2022, GHG, through its Residential Home Health Illinois and Residential Hospice Illinois affiliates, acquired an interest in the home health and hospice assets of NorthShore University HealthSystem, an integrated healthcare delivery system serving patients throughout the Chicago, IL area. The transaction resulted in a decrease to GHG’s interest in Residential Hospice Illinois and a $0.6 million non-operating gain was recorded in the first quarter of 2022 related to the change in interest.

Automotive

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

Automotive includes eight automotive dealerships in the Washington, D.C. metropolitan area and Richmond, VA: Ourisman Lexus of Rockville, Ourisman Honda of Tysons Corner, Ourisman Jeep Bethesda, Ourisman Ford of Manassas, and Toyota of Woodbridge and Ourisman Chrysler-Dodge-Jeep-Ram (CDJR) of Woodbridge, which were acquired on July 5, 2022 from the Lustine Automotive Group, and Ourisman Toyota of Richmond, which was acquired on September 27, 2023 from McGeorge Toyota. The automotive group was awarded a Kia Open Point dealership in Bethesda, MD which commenced operations at the end of December 2023. Christopher J. Ourisman, a member of the Ourisman Automotive Group family of dealerships, and his team of industry professionals operates and manages the dealerships; the Company holds a 90% stake.

Revenues for 2023 increased 47% due to the acquisitions of the Toyota of Woodbridge, CDJR of Woodbridge and Toyota of Richmond dealerships and sales growth at the other dealerships, except for the Jeep dealership, which had lower revenues due to a decline innew vehicle sales. Additionally, allof the dealerships reported sales growth for services and parts in 2023. Operating results for 2023 improved due largely to the Toyota of Woodbridge, CDJR of Woodbridge and Toyota of Richmond acquisitions, and improved results at the Honda and Lexus dealerships, partially offset by declines at the Jeep dealership due primarily to a reduction in new vehicle sales and related margins, and declines at the Ford dealership in margins on new vehicle sales.

Other Businesses

A summary of revenue by category for other businesses:

Overall, revenue from other businesses declined 11% in 2023. Retail revenue declined largely due to significantly lower revenue at Society6, partially offset by revenue growth at Framebridge. Media revenue declined due to lower revenue at WGB and Code3, partially offset by revenue growth at Slate, Foreign Policy and City Cast. Specialty revenue increased due to revenue growth at CRG. Excluding the former Leaf businesses, revenues from other businesses increased in 2023.

Overall, operating results at other businesses improved in 2023 due largely to $129.0 million in goodwill and other long-lived assets impairment charges at the former Leaf businesses recorded in the fourth quarter of 2022, partially offset by a $50.2 million goodwill impairment charge recorded at WGB in the third quarter of 2023. Excluding these impairment charges, operating results declined in 2023, due to increased losses at the former Leaf businesses, Framebridge, Decile and City Cast, partially offset by improved results at Slate, Foreign Policy, CRG and Code3, and a reduction in losses due to the sales of CyberVista and Pinna.

Leaf Group

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

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

Revenues at each of the three Leaf businesses declined in 2023, with substantial declines at Society6 and WGB. Revenue decreases at Society6 are due to declines in traffic, conversion rates and related sales for both direct to consumer and business to business categories; revenue declines at WGB are due to reduced traffic and the soft digital advertising market for both direct and programmatic categories. Overall, the former Leaf businesses reported significant operating losses for 2023 and 2022. Excluding impairment charges, losses increased in 2023.

As a result of the substantial digital advertising revenue declines and continued significant operating losses at WGB, the Company recorded a $50.2 million goodwill impairment charge in the third quarter of 2023. As a result of the substantial revenue declines and significant operating losses at the former Leaf businesses in the fourth quarter of 2022, the Company recorded $129.0 million in goodwill and intangible asset impairment charges.

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

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

Framebridge

Framebridge is a custom framing service company, headquartered in Washington, D.C., with 22 retail locations in the Washington, D.C., New York City, Atlanta, GA, Philadelphia, PA, Boston, MA and Chicago, IL areas and two manufacturing facilities in Kentucky and New Jersey. Framebridge continues to actively explore opportunities for further store expansion. Revenues increased in 2023 due to an increase in retail revenue from same-store sales growth and operating additional retail stores compared to the same periods of 2022. Framebridge is an investment stage business and reported significant operating losses in 2023 and 2022.

Other

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

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

Other businesses also included CyberVista, which was sold in October 2022 when the Company announced a strategic merger of CyberVista and CyberWire, a B2B cybersecurity audio network to form a new parent company, N2K Networks. In connection with the merger, the Company recorded an $18.4 million non-cash, non-operating gain. The Company’s investment in N2K Networks is reported as an equity method investment.

In the first and second quarters of 2023, Code3 implemented a SIP to reduce the number of employees, which was funded by the assets of the Company’s pension plan; $1.9 million in related non-operating pension expense was recorded in the first half of 2023.

Corporate Office

Corporate office includes the expenses of the Company’s corporate office, certain continuing obligations related to prior business dispositions, and a net credit recorded in each of 2023 and 2022 from fair value changes in contingent consideration related to the Framebridge acquisition.

Equity in Losses of Affiliates

At December 31, 2023, the Company held an approximate 18% interest in Intersection Holdings, LLC (Intersection), a company that provides digital marketing and advertising services and products for cities, transit systems, airports, and other public and private spaces; a 49.9% interest in N2K Networks on a fully diluted basis; and a 42.2% interest in Realm on a fully diluted basis. The Company also holds interests in several other affiliates, including a number of home health and hospice joint ventures managed by GHG and two joint ventures managed by Kaplan. Overall, the Company recorded equity in losses of affiliates of $5.2 million for 2023, compared to $2.8 million for 2022. These amounts include $16.0 million and $11.8 million in net lossesfor 2023 and 2022, respectively, from affiliates whose operations are not managed by the Company.

Net Interest Expense and Related Balances

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

The Company incurred net interest expense of $56.2 million in 2023, compared to $51.2 million in 2022. The Company recorded net interest expense of $10.1 million and $16.5 million in 2023 and 2022, respectively, to adjust the fair value of the mandatorily redeemable noncontrolling interest at GHG. Excluding these adjustments, the increase in net interest expense relates primarily to increased debt at the automotive dealerships and higher interest rates on the Company’s variable debt.

At December 31, 2023, the Company had $811.8 million in borrowings outstanding at an average interest rate of 6.4%, and cash, marketable equity securities and other investments of $898.9 million. At December 31, 2023, the Company had $97.9 million outstanding on its $300 million revolving credit facility. At December 31, 2022, the Company had $726.4 million in borrowings outstanding at an average interest rate of 5.7%, and cash, marketable equity securities and other investments of $812.8 million.

Non-Operating Pension and Postretirement Benefit Income, Net

The Company recorded net non-operating pension and postretirement benefit income of $133.8 million in 2023, compared to $197.9 million in 2022.

In the fourth quarter of 2023, the Company recorded $0.2 million in expenses related to a non-operating SIP at the television broadcasting division. In the second quarter of 2023, the Company recorded $5.5 million in expenses related to non-operating SIPs at other businesses and the education and television broadcasting divisions. In the first quarter of 2023, the Company recorded $4.1 million in expenses related to non-operating SIPs at other businesses. In the fourth quarter of 2022, the Company recorded $3.6 million in expenses related to a non-operating SIP at the education division.

Gain (Loss) on Marketable Equity Securities, Net

The Company recognized $138.1 million in net gains on marketable equity securities in 2023 compared to $139.6 million in net losses in 2022.

Other Non-Operating Income

The Company recorded total other non-operating income, net, of $19.1 million in 2023, compared to $33.5 million in 2022. The 2023 amounts included a non-cash gain of$10.0 million on the sale of Pinna;$5.6 million in gains related to sales of businesses and contingent consideration; a$3.1 million increase in the fair value of cost method investments; a $1.0 million gain on sales of cost method investments, and other items; partially offset by$1.1 million in foreign currency losses and a$0.5 million impairment on a cost method investment. The 2022 amounts included a non-cash gain of $18.4 million on the sale of CyberVista; $4.3 million in gains related to sales of businesses and contingent consideration; a $6.9 million increase in the fair value of cost method investments; $3.3 million in gains on sales of cost method investments; a $0.6 million gain on sale of an equity affiliate, and other items; partially offset by $2.0 million in foreign currency losses and a $1.3 million impairment on a cost method investment.

Provision for Income Taxes

The Company’s effective tax rates for 2023 and 2022 were 29.2% and 42.1%, respectively. The Company’s effective tax rates in 2023 and 2022 were unfavorably impacted by permanent differences related to the goodwill and intangible asset impairment charges and the interest expense recorded to adjust the fair value of the mandatorily redeemable noncontrolling interest at GHG. Excluding the impact of these items, the overall income tax rates for 2023 and 2022 were 24.0% and 24.1%, respectively.

FINANCIAL CONDITION: LIQUIDITY AND CAPITAL RESOURCES

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

Cash generated by operations is the Company’s primary source of liquidity. The Company maintains investments in a portfolio of marketable equity securities, which is considered when assessing the Company’s sources of liquidity. An additional source of liquidity includes the undrawn portion of the Company’s $300 million five-year revolving credit facility, amounting to $202.1 million at December 31, 2023.

During 2023, the Company’s cash and cash equivalents increased by $0.6 million, due to cash generated from operations, proceeds from the sale of marketable equity securities, net proceeds from vehicle floor plan payable, and net borrowings, which were offset by share repurchases, acquisitions, capital expenditures, a loan to a related party, additional investments in marketable equity securities and equity affiliates, and dividend payments. In 2023, the Company’s borrowings increased by $85.5 million, primarily due to the issuance of the term loan and new loans at the automotive subsidiary, offset by repayments under the revolving credit facility and commercial notes at the automotive subsidiary.

As of December 31, 2023 and 2022, the Company had money market investments of $5.6 million and $7.7 million, that were included in cash and cash equivalents. At December 31, 2023, the Company held approximately $138 million in cash and cash equivalents in businesses domiciled outside the U.S., of which approximately $8 million is not available for immediate use in operations or for distribution. Additionally, Kaplan’s business operations outside the U.S. retain cash balances to support ongoing working capital requirements, capital expenditures, and regulatory requirements. As a result, the Company considers a significant portion of the cash and cash equivalents balance held outside the U.S. as not readily available for use in U.S. operations.

At December 31, 2023, the fair value of the Company’s investments in marketable equity securities was $690.2 million, which includes investments in the common stock of four publicly traded companies. The Company purchased $4.6 million of marketable equity securities during 2023, excluding $1.5 million that was purchased in December 2022, but settled in January 2023. During 2023, the Company sold marketable equity securities that generated proceeds of $62.0 million. At December 31, 2023, the net unrealized gain related to the Company’s investments totaled $464.2 million.

In April 2023, the Company entered into a term note agreement to loan Intersection $30.0 million at an interest rate of 9% per annum. The principal and interest on the note are payable in monthly installments over 5 years with the final payment due by May 2028. The outstanding balance on this loan was $28.8 million as of December 31, 2023.

The Company had working capital of $619.6 million and $534.1 million at December 31, 2023 and 2022, respectively. The Company maintains working capital levels consistent with its underlying business requirements and consistently generates cash from operations in excess of required interest or principal payments.

At December 31, 2023 and 2022, the Company had borrowings outstanding of $811.8 million and $726.4 million, respectively. The Company’s borrowings at December 31, 2023 were mostly from $400.0 million of 5.75% unsecured notes due June 1, 2026, $97.9 million in outstanding borrowings under the Company’s revolving credit facility, a term loan of $147.5 million, and real estate and capital term loans of $137.6 million at the automotive subsidiary. The Company’s borrowings at December 31, 2022 were mostly from $400.0 million of 5.75% unsecured notes due June 1, 2026, $200.2 million in outstanding borrowings under the Company’s revolving credit facility and commercial notes of $116.6 million at the automotive subsidiary. The interest on the $400.0 million of 5.75% unsecured notes is payable semi-annually on June 1 and December 1.

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

On September 26, 2023, the Company’s automotive subsidiary entered into a credit agreement with Truist Bank, which includes (i) a $75.2 million real estate term loan, (ii) a $65.0 million capital term loan, (iii) a $50.0 million delayed draw term loan, and (iv) establishment of a revolving floor plan credit facility. The real estate term loan is payable in monthly installments of $0.3 million and bears interest at variable rates based on SOFR plus 1.75% per annum, and the capital term loan is payable in monthly installments of $0.5 million and bears interest at variable rates based on SOFR plus 2.00% per annum. The monthly installment payments on the real estate and capital term loans commenced on November 1, 2023, with final payments of the outstanding principal balances due on September 26, 2028. Subject to terms and conditions set forth in the credit agreement, the automotive subsidiary may also request borrowings of delayed draw term loans for which the proceeds may be used to (i) finance the acquisition of automobile dealerships (delayed draw capital loan) and (ii) finance the acquisition of real estate (delayed draw real estate loan). The delayed draw term loan bears interest at variable rates based on SOFR plus an applicable margin based on the type of delayed draw term loan requested. The delayed draw term loan availability period terminates on September 26, 2025. The automotive subsidiary did not borrow against the delayed draw term loan as of December 31, 2023.

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

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

During 2023 and 2022, the Company had average borrowings outstanding of approximately $745.0 million and $689.9 million, respectively, at average annual interest rates of approximately 6.1% and 4.8%, respectively. The Company incurred net interest expense of $56.2 million and $51.2 million, respectively, during 2023 and 2022. Included in the 2023 and 2022 interest expense is $10.1 million and $16.5 million, respectively, to adjust the fair value of the mandatorily redeemable noncontrolling interest (see Note 11).

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

The Company’s current credit ratings are as follows:

The Company expects to fund its estimated capital needs primarily through existing cash balances and internally generated funds, and, as needed, from borrowings under its revolving credit facility. As of December 31, 2023, the Company had $97.9 million outstanding under the $300 million revolving credit facility. In management’s opinion, the Company will have sufficient financial resources to meet its business requirements in the next 12 months, including working capital requirements, capital expenditures, interest payments, potential acquisitions and strategic investments, dividends and stock repurchases.

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

Operating Activities. Cash provided by operating activities is net income adjusted for certain non-cash items and changes in assets and liabilities. The Company’s net cash flow provided by operating activities were as follows:

Net cash provided by operating activities consists primarily of cash receipts from customers, less disbursements for costs, benefits, income taxes, interest and other expenses.

For 2023 compared to 2022, the increase in net cash provided by operating activities is primarily due to changes in operating assets and liabilities, partially offset by lower net income, net of non-cash adjustments. Changes in operating assets and liabilities were primarily driven by increases in accounts payable and accrued liabilities. The change in non-cash activities is largely the result of fluctuations in the share prices of the Company’s investments in marketable equity securities with gains in 2023 compared to losses in 2022.

For 2022 compared to 2021, the increase in net cash provided by operating activities is primarily due to higher net income, net of non-cash adjustments, partially offset by changes in operating assets and liabilities. Changes in operating assets and liabilities were driven by higher purchases of inventories and decreases in accounts payable and accrued liabilities, partially offset by an increase in the collection of accounts receivable.

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

Capital Expenditures. The 2023 and 2022 capital expenditures are lower than 2021 due to significant land and building purchases at Kaplan International’s sixth-form college in London, U.K. and at the automotive subsidiary in 2021. The amounts reflected in the Company’s Statements of Cash Flows are based on cash payments made during the relevant periods, whereas the Company’s capital expenditures for 2023, 2022 and 2021 disclosed in Note 19 to the Consolidated Financial Statements include assets acquired during the year. The Company estimates that its capital expenditures will be in the range of $95 million to $105 million in 2024.

Acquisitions. During 2023, the Company acquired five businesses: one in automotive, three small businesses in healthcare and one in other businesses for $83.3 million in cash and contingent consideration and the assumption of floor plan payables. In September 2023, the Company’s automotive subsidiary acquired a Toyota automotive dealership, including the real property for the dealership operations. In addition to a cash payment and the assumption of $2.2 million in floor plan payables, the automotive subsidiary borrowed $37.0 million to finance the acquisition. During 2022, the Company acquired seven businesses: five in healthcare and two in automotive, for $143.2 million in cash and contingent consideration and the assumption of floor plan payables. GHG acquired two small businesses in August 2022, a 100% interest in a multi-state provider of Applied Behavioral Analysis clinics in July 2022, and two small businesses in May 2022. In July 2022, the Company’s automotive subsidiary acquired two automotive dealerships, including the real property for the dealership operations. In addition to a cash payment and the assumption of $10.9 million in floor plan payables, the automotive subsidiary borrowed $77.4 million to finance the acquisition. During 2021, the Company acquired six businesses: two small businesses in its education division, two small businesses in healthcare, one new auto dealership in automotive, and all the outstanding shares of Leaf for cash and the assumption of $9.2 million in liabilities related to their pre-acquisition stock compensation plan. Leaf operations are included in other businesses.

Net Proceeds from Sales of Marketable Equity Securities. During 2023, 2022 and 2021, the Company sold marketable securities that generated proceeds of $62.0 million, $102.0 million and $65.5 million, respectively. The Company purchased$4.6 million, $42.1 million, of which $1.5 million was settled in January 2023, and $48.0 million of marketable equity securities during 2023, 2022 and 2021, respectively.

Loan to related party. In April 2023, the Company entered into a term note agreement to loan Intersection $30.0 million at an interest rate of 9% per annum. The principal and interest on the note are payable in monthly installments over 5 years with the final payment due by May 2028. The outstanding balance on this loan was $28.8 million as of December 31, 2023.

Investment in Equity Affiliates. During 2023, the Company made additional investments in Intersection and Realm. During 2022, GHG invested an additional $18.5 million in two affiliates to fund their acquisition of an interest in a health system in Illinois and the Company also made an additional investment of $5.0 million in N2K Networks, the new parent entity formed through the CyberVista transaction.

Financing Activities. The Company’s net cash flow (used in) provided by financing activities were as follows:

Borrowings and Vehicle Floor Plan Payable. In September 2023, the Company’s automotive subsidiary entered into a credit agreement with Truist Bank which includes (i) a $75.2 million real estate term loan, (ii) a $65.0 million capital term loan, (iii) a $50.0 million delayed draw term loan, and (iv) establishment of a revolving floor plan credit facility. The automotive subsidiary used the net proceeds from the real estate and capital term loans to acquire an automotive dealership, including the real property for the dealership operations, and to repay the outstanding balances of the commercial notes maturing in 2031 and 2032. On July 28, 2023, the Company entered into a $150 million term loan and used the proceeds to repay the U.S. dollar borrowings of the $300 million revolving credit facility. In July 2022, the Company’s automotive subsidiary amended its commercial note to, among other things, increase the aggregate loan amount to $71.6 million and entered into three commercial notes in an aggregate amount of $27.2 million. The additional borrowings were used to acquire two automotive dealerships, including the real property for the dealership operations. In 2021, the Company borrowed against the $300 million revolving credit facility, which borrowing was used to purchase land and buildings at Kaplan International’s sixth-form college in London, U.K. and at the automotive subsidiary and, to a lesser extent, to repurchase stock and fund various acquisitions during the fourth quarter of 2021. In addition, the automotive subsidiary borrowed $47.3 million, which was used to repay the outstanding balance of the term loan due on January 31, 2029 and fund the acquisition of an automotive dealership in the fourth quarter. In 2023, 2022, and 2021, the Company used vehicle floor plan financing to fund the purchase of new, used and service loaner vehicles at its automotive subsidiary. The proceeds from (repayments of) the vehicle floor plan payable fluctuates with changes in the amount of vehicle inventory held by the automotive dealerships.

Common Stock Repurchases. During 2023, 2022, and 2021, the Company purchased a total of 325,134, 121,761, and 93,969 shares, respectively, of its Class B common stock at a cost of approximately $195.0 million, $71.4 million, and $55.7 million, respectively, including commissions and accrued excise tax of $1.8 million for 2023 purchases. On May 4, 2023, the Board of Directors authorized the Company to acquire up to 500,000 shares of its Class B common stock. The Company did not announce a ceiling price or time limit for the purchases. At December 31, 2023, the Company had remaining authorization from the Board of Directors to purchase up to 236,403 shares of Class B common stock.

Dividends. The annual dividend rate per share was $6.60, $6.32 and $6.04 in 2023, 2022 and 2021, respectively. The Company expects to pay a dividend of $6.88 per share in 2024.

Other. In 2023 and 2022, the Company paid $5.3 million and $5.7 million related to contingent consideration and deferred payments from prior acquisitions. In 2021, the Company paid $30.9 million related to contingent consideration and deferred payments from prior acquisitions, mostly for the 2020 acquisition of Framebridge. In December 2023, the Company acquired some of the minority-owned shares of CSI for a total amount of $20.0 million. The Company paid cash of $5.0 million and entered into a promissory note with the minority owners for the remaining $15.0 million. In March 2021, Hoover’s minority shareholders put their remaining outstanding shares to the Company, which had a redemption value of $3.5 million.

Contractual Obligations. The following reflects a summary of the Company’s contractual obligations as of December 31, 2023:

(1) Includes network fees, employment agreements and programming purchase commitments for the Company’s television broadcasting business.

(2) Includes purchase obligations related to capital projects and other legally binding commitments. Other purchase orders made in the ordinary course of business are excluded from the table above. Any amounts for which the Company is liable under purchase orders are reflected in the Company’s Consolidated Balance Sheets as accounts payable and accrued liabilities.

(3) Primarily made up of multiemployer pension plan withdrawal obligations and postretirement benefit obligations other than pensions. The Company has other long-term liabilities excluded from the table above, including obligations for deferred compensation, long-term incentive plans and long-term deferred revenue.

Other. The Company does not have any off-balance-sheet arrangements or financing activities with special-purpose entities.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and judgments that affect the amounts reported in the financial statements. On an ongoing basis, the Company evaluates its estimates and assumptions. The Company bases its estimates on historical experience and other assumptions believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates.

An accounting policy is considered critical if it is important to the Company’s financial condition and results and if it requires management’s most difficult, subjective and complex judgments in its application. For a summary of all of the Company’s significant accounting policies, see Note 2 to the Company’s Consolidated Financial Statements.

Revenue Recognition, Trade Accounts Receivable and Allowance for Credit Losses. Education revenue is primarily derived from postsecondary education services, professional education and test preparation services. Revenue, net of any refunds, corporate discounts, scholarships and employee tuition discounts is recognized ratably over the instruction period or access period for higher education and supplemental education services.

At Kaplan International and Kaplan Supplemental Education, estimates of average student course length are developed for each course, along with estimates for the anticipated level of student drops and refunds from test performance guarantees, and these estimates are evaluated on an ongoing basis and adjusted as necessary. As Kaplan’s businesses and related course offerings have changed, including more online programs, the complexity and significance of management’s estimates have increased.

KHE provides non-academic operations support services to Purdue Global pursuant to a TOSA, which includes technology support, helpdesk functions, human resources support for faculty and employees, admissions support, financial aid administration, advertising, back-office business functions, and certain student recruitment services. KHE is not entitled to receive any reimbursement of costs incurred in providing support services, or any fee, unless and until Purdue Global has first covered all of its academic costs (subject to a cap), received payment for cost efficiencies, if any, and during the first five years of the TOSA, receive a priority payment of $10 million per year in addition to the operating cost reimbursements and cost efficiency payments. KHE will receive reimbursement for its operating costs of providing the support services after payment of Purdue Global’s operating costs, cost efficiency payments, and priority payment. If there are sufficient revenues, KHE may be entitled to a cost efficiency payment, if any, and an additional fee equal to 12.5% of Purdue Global’s revenue. Subject to certain limitations, a portion of the fee that is earned by KHE in one year may be carried over to subsequent years for payment to Kaplan.

The support fee and reimbursement for KHE support costs are entirely dependent on the availability of cash at the end of Purdue Global’s fiscal year (June 30), and therefore, all consideration in the contract is variable. The Company uses significant judgment to forecast the operating results of Purdue Global, the availability of cash at the end of each fiscal year, and the consideration it expects to receive from Purdue Global annually. Key assumptions used in the forecast model include student census and degree enrollment data, Purdue Global and KHE expenses, changes to working capital, contractually stipulated minimum payments, and lead conversion rates. The forecast is updated as uncertainties are resolved. The Company reviews and updates the assumptions regularly, as a significant change in one or more of these estimates could affect the revenue recognized. Changes to the estimated variable consideration were not material for the year ended December 31, 2023.

A Kaplan International business has a contract with an examination body through August 2029 comprised of two performance obligations, one to build and create a professional exam and another to manage the delivery of that exam to qualified candidates. The first obligation was completed in 2021. The second obligation began after the first obligation was completed and is expected to continue through the end of the contract term. Revenues are recognized for both of these obligations by allocating the transaction price based on forecasted financial results and the use of a market-based profit margin applied to costs incurred during the financial reporting period. This profit margin, determined at contract inception, is different for each obligation as a result of the different value created by each distinct obligation. The forecast, including key assumptions such as expected candidate volumes and related exam-management expenses, is updated as future uncertainties are resolved, which may result in changes to the transaction price. The Company reviews and updates the assumptions regularly, as a significant change in one or more of these estimates could affect revenue recognized. Changes to the estimated variable consideration were not material for the year ended December 31, 2023.

The determination of whether revenue should be reported on a gross or net basis is based on an assessment of whether the Company acts as a principal or an agent in the transaction. In certain cases, the Company is considered the agent, and the Company records revenue equal to the net amount retained when the fee is earned. In these cases, costs incurred with third-party suppliers are excluded from the Company’s revenue. The Company assesses whether it obtained control of the specified goods or services before they are transferred to the customer as part of this assessment. In addition, the Company considers other indicators such as the party primarily responsible for fulfillment, inventory risk and discretion in establishing price.

Accounts receivable have been reduced by an allowance that reflects the current expected credit losses associated with the receivables. This estimated allowance is based on historical write-offs, current macroeconomic conditions, reasonable and supportable forecasts of future economic conditions and management’s evaluation of the financial condition of the customer. The Company generally considers an account past due or delinquent when a student or customer misses a scheduled payment. The Company writes off accounts receivable balances deemed uncollectible against the allowance for credit losses following the passage of a certain period of time, or generally when the account is turned over for collection to an outside collection agency.

Goodwill and Other Intangible Assets. The Company has a significant amount of goodwill and indefinite-lived intangible assets that are reviewed at least annually for possible impairment.

The Company performs its annual goodwill and intangible assets impairment test as of November 30. Goodwill and other intangible assets are reviewed for possible impairment between annual tests if an event occurred or circumstances changed that would more likely than not reduce the fair value of the reporting unit or other intangible assets below its carrying value.

Goodwill

The Company tests its goodwill at the reporting unit level, which is an operating segment or one level below an operating segment. The Company initially performs an assessment of qualitative factors to determine if it is necessary to perform a quantitative goodwill impairment test. The Company quantitatively tests goodwill for impairment if, based on its assessment of the qualitative factors, it determines that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, or if it decides to bypass the qualitative assessment. The quantitative goodwill impairment test compares the estimated fair value of a reporting unit with its carrying amount, including goodwill. An impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value.

The Company performed an interim impairment review of goodwill at the Dekko and WGB reporting units in the third quarter of 2023 as a result of continued sustained weakness in demand for certain Dekko power and data products, primarily in the commercial office space market, and substantial digital advertising revenue declines and continued significant operating losses at WGB. The Company recorded a $47.8 million and $50.2 million goodwill impairment charge at the Dekko and WGB reporting units, respectively, as a result of the interim impairment reviews. The Company estimated the fair value of the reporting units by utilizing a discounted cash flow model. The carrying value of each reporting unit exceeded its estimated fair value, resulting in a goodwill impairment charge for the amount by which the carrying value exceeded the estimated fair value after taking into account the effect of deferred income taxes. As a result of the impairment charge, no goodwill remains at the Dekko reporting unit. Dekko is included in manufacturing and WGB in other businesses.

The Company had 20 reporting units as of December 31, 2023. The reporting units with significant goodwill balances as of December 31, 2023, were as follows, representing 94% of the total goodwill of the Company:

As of November 30, 2023, in connection with the Company’s annual impairment testing, the Company decided to perform the quantitative goodwill impairment process at all of the reporting units. The Company’s policy requires the performance of a quantitative impairment review of the goodwill at least once every three years. The Company used a discounted cash flow model, and, where appropriate, a market value approach was also utilized to supplement the discounted cash flow model to determine the estimated fair value of its reporting units. The Company made estimates and assumptions regarding future cash flows, discount rates, long-term growth rates and market values to determine each reporting unit’s estimated fair value. The methodology used to estimate the fair value of the Company’s reporting units on November 30, 2023, was consistent with the one used during the 2022 annual goodwill impairment test.

The Company made changes to certain of its assumptions utilized in the discounted cash flow models for 2023 compared with the prior year to take into account changes in the economic environment, regulations and their impact on the Company’s businesses. The key assumptions used by the Company were as follows:

• Expected cash flows underlying the Company’s business plans for the periods 2024 through 2028 were used. The Company used expected cash flows for the periods 2024 through 2033 for the Hoover and Framebridge reporting units. The expected cash flows took into account historical growth rates, the effect of the changed economic outlook at the Company’s businesses, industry challenges and an estimate for the possible impact of any applicable regulations.

• Cash flows beyond 2028 and 2033, where applicable, were projected to grow at a long-term growth rate, which the Company estimated between 1.5% and 3% for each reporting unit.

• The Company used a discount rate of 9% to 22% to risk adjust the cash flow projections in determining the estimated fair value.

The fair value of each of the reporting units exceeded its respective carrying value as of November 30, 2023.

The estimated fair values of the Framebridge and WGB reporting units exceeded their carrying values by a margin of less than 25%. The Company recorded goodwill impairments at the WGB reporting unit in 2023 and 2022. The total goodwill at these reporting units was $68.4 million as of December 31, 2023, or 4% of the total goodwill of the Company. There exists a reasonable possibility that a decrease in the assumed projected cash flows or long-term growth rate, or an increase in the discount rate assumption used in the discounted cash flow model of these reporting units, could result in additional impairment charges.

The estimated fair value of the Company’s other reporting units with significant goodwill balances exceeded their respective carrying values by a margin in excess of 25%. It is possible that impairment charges could occur in the future, as changes in market conditions and the inherent variability in projecting future operating performance could result in adverse changes in projections for future operating results or other key assumptions, such as projected revenue, profit margin, capital expenditures or cash flows associated with fair value estimates and could lead to additional future impairments, which could be material.

Indefinite-Lived Intangible Assets

The Company initially assesses qualitative factors to determine if it is more likely than not that the fair value of its indefinite-lived intangible assets is less than its carrying value. The Company compares the fair value of the indefinite-lived intangible asset with its carrying value if the qualitative factors indicate it is more likely than not that the fair value of the asset is less than its carrying value or if it decides to bypass the qualitative assessment. The Company records an impairment loss if the carrying value of the indefinite-lived intangible assets exceeds the fair value of the assets for the difference in the values. The Company uses a discounted cash flow model, and, in certain cases, a market value approach is also utilized to supplement the discounted cash flow model to determine the estimated fair value of the indefinite-lived intangible assets. The Company makes estimates and assumptions regarding future cash flows, discount rates, long-term growth rates and other market values to determine the estimated fair value of the indefinite-lived intangible assets. The Company’s policy requires the performance of a quantitative impairment review of the indefinite-lived intangible assets at least once every three years.

The Company’s intangible assets with an indefinite life are principally from trade names, franchise rights and FCC licenses. The fair value of all the indefinite-lived intangible assets exceeded their respective carrying values as of November 30, 2023. The estimated fair values of indefinite-lived intangible assets with a total carrying value of $74.0 million exceeded their carrying value by a margin of less than 10%. There exists a reasonable possibility that impairment charges could occur in the future, as changes in market conditions and the inherent variability in projecting future operating performance could result in adverse changes in projections for future operating results or other key assumptions, such as projected revenue, profit margin, capital expenditures or cash flows associated with fair value estimates and could lead to future impairments, which could be material.

Pension Costs. The Company sponsors a defined benefit pension plan for eligible employees in the U.S. Excluding curtailment gains, settlement gains and special termination benefits, the Company’s net pension credit was $111.3 million, $170.2 million and $93.0 million for 2023, 2022 and 2021, respectively. The Company’s pension benefit obligation and related credits are actuarially determined and are significantly impacted by the Company’s assumptions related to future events, including the discount rate, expected return on plan assets and rate of compensation increases. The Company evaluates these critical assumptions at least annually and, periodically, evaluates other assumptions involving demographic factors, such as retirement age, mortality and turnover, and updates them to reflect its experience and expectations for the future. Actual results in any given year will often differ from actuarial assumptions because of economic and other factors.

The Company assumed a 6.25% expected return on plan assets for 2023, 2022 and 2021. The Company’s actual return (loss) on plan assets was 23.2% in 2023, (23.4%) in 2022 and 24.4% in 2021. The 10-year and 20-year actual returns on plan assets on an annual basis were 7.7% and 8.9%, respectively.

Accumulated and projected benefit obligations are measured as the present value of future cash payments. The Company discounts those cash payments using the weighted average of market-observed yields for high-quality fixed-income securities with maturities that correspond to the payment of benefits. Lower discount rates increase present values and generally increase subsequent-year pension costs; higher discount rates decrease present values and decrease subsequent-year pension costs. The Company’s discount rate at December 31, 2023, 2022 and 2021, was 5.2%, 5.5% and 2.9%, respectively, reflecting market interest rates.

Changes in key assumptions for the Company’s pension plan would have had the following effects on the 2023 pension credit, excluding curtailment gains, settlement gains and special termination benefits:

• Expected return on assets – A 1% increase or decrease to the Company’s assumed expected return on plan assets would have increased or decreased the pension credit by approximately $24.5 million.

• Discount rate – A 1% decrease to the Company’s assumed discount rate would have decreased the pension credit by approximately $8.7 million. A 1% increase to the Company’s assumed discount rate would have increased the pension credit by approximately $7.2 million.

The Company’s net pension credit includes an expected return on plan assets component, calculated using the expected return on plan assets assumption applied to a market-related value of plan assets. The market-related value of plan assets is determined using a five-year average market value method, which recognizes realized and unrealized appreciation and depreciation in market values over a five-year period. The value resulting from applying this method is adjusted, if necessary, such that it cannot be less than 80% or more than 120% of the market value of plan assets as of the relevant measurement date. As a result, year-to-year increases or decreases in the market-related value of plan assets impact the return on plan assets component of pension credit for the year.

At the end of each year, differences between the actual return on plan assets and the expected return on plan assets are combined with other differences in actual versus expected experience to form a net unamortized actuarial gain or loss in accumulated other comprehensive income. Only those net actuarial gains or losses in excess of the deferred realized and unrealized appreciation and depreciation are potentially subject to amortization.

The types of items that generate actuarial gains and losses that may be subject to amortization in net periodic pension (credit) cost include the following:

• Asset returns that are more or less than the expected return on plan assets for the year;

• Actual participant demographic experience different from assumed (retirements, terminations and deaths during the year);

• Actual salary increases different from assumed; and

• Any changes in assumptions that are made to better reflect the anticipated experience of the plan or to reflect current market conditions on the measurement date (discount rate, longevity increases, changes in expected participant behavior and expected return on plan assets).

Amortization of the unrecognized actuarial gain or loss is included as a component of pension credit for a year if the magnitude of the net unamortized gain or loss in accumulated other comprehensive income exceeds 10% of the greater of the benefit obligation or the market-related value of assets (10% corridor). The amortization component is equal to that excess divided by the average remaining service period of active employees expected to receive benefits under the plan. At the end of 2020, the Company had net unamortized actuarial gains in accumulated other comprehensive income subject to amortization outside the 10% corridor, and therefore, an amortized gain of $7.9 million was included in the pension credit for 2021.

During 2021, there were significant pension asset gains and an increase in the discount rate that resulted in net unamortized actuarial gains in accumulated other comprehensive income subject to amortization outside the 10% corridor, and therefore, an amortized gain of $68.7 million was included in the pension credit for 2022.

During 2022, there were significant pension asset losses partially offset by an increase in the discount rate that resulted in net unamortized actuarial gains in accumulated other comprehensive income subject to amortization outside the 10% corridor, and therefore, an amortized gain of $39.8 million was included in the pension credit for 2023.

During 2023, there were significant pension asset gains partially offset by a decrease in the discount rate. The Company currently estimates that there will be net unamortized actuarial gains in accumulated other comprehensive income subject to amortization outside the 10% corridor, and therefore, an amortized gain amount of $50.1 million is included in the estimated pension credit for 2024.

Overall, the Company estimates that it will record a net pension credit of approximately $118.0 million in 2024.

Note 15 to the Company’s Consolidated Financial Statements provides additional details surrounding pension costs and related assumptions.

Accounting for Income Taxes.

Valuation Allowances

Deferred income taxes arise from temporary differences between the tax and financial statement recognition of assets and liabilities. In evaluating its ability to recover deferred tax assets within the jurisdiction from which they arise, the Company considers all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial operations. These assumptions require significant judgment about forecasts of future taxable income.

As of December 31, 2023, the Company had state income tax net operating loss carryforwards of $1,106.9 million, which will expire at various future dates. Also at December 31, 2023, the Company had $112.7 million of non-U.S. income tax loss carryforwards, of which $63.4 million may be carried forward indefinitely; $45.1 million of losses that, if unutilized, will expire in varying amounts through 2028; and $4.2 million of losses that, if unutilized, will start to expire after 2028. At December 31, 2023, the Company has established approximately $66.3 million in total valuation allowances, primarily against deferred state tax assets, net of U.S. Federal income taxes, and non-U.S. deferred tax assets, as the Company believes that it is more likely than not that the benefit from certain state and non-U.S. net operating loss carryforwards and other deferred tax assets will not be realized. The Company has established valuation allowances against state income tax benefits recognized, without considering potentially offsetting deferred tax liabilities established with respect to prepaid pension cost and goodwill. Prepaid pension cost and goodwill have not been considered a source of future taxable income for realizing deferred tax benefits recognized since these temporary differences are not likely to reverse in the foreseeable future. However, certain deferred state tax assets have an indefinite life. As a result, the Company has considered deferred tax liabilities for prepaid pension cost and goodwill as a source of future taxable income for realizing those deferred state tax assets. The valuation allowances established against state and non-U.S. income tax benefits recorded may increase or decrease within the next 12 months, based on operating results, the market value of investment holdings or business and tax planning strategies; as a result, the Company is unable to estimate the potential tax impact, given the uncertain operating and market environment. The Company will be monitoring future operating results and projected future operating results on a quarterly basis to determine whether the valuation allowances provided against state and non-U.S. deferred tax assets should be increased or decreased, as future circumstances warrant.

Recent Accounting Pronouncements. See Note 2 to the Company’s Consolidated Financial Statements for a discussion of recent accounting pronouncements.

To the Board of Directors and Stockholders of Graham Holdings Company

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Graham Holdings Company and its subsidiaries (the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements of operations, of comprehensive income (loss), of changes in common stockholders' equity and of cash flows for each of the three years in the period ended December 31, 2023, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

As described in Management’s Report on Internal Control Over Financial Reporting, management has excluded Ourisman Toyota of Richmond from its assessment of internal control over financial reporting as of December 31, 2023 because it was acquired by the Company in a purchase business combination during 2023. We have also excluded Ourisman Toyota of Richmond from our audit of internal control over financial reporting. Ourisman Toyota of Richmond is a majority-owned subsidiary whose total assets and total revenues excluded from management’s assessment and our audit of internal control over financial reporting represent less than 1% and approximately 1%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2023.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Interim Goodwill Impairment Assessment - Framebridge Reporting Unit

As described in Notes 2 and 9 to the consolidated financial statements, the Company’s consolidated goodwill balance was $1,525.2 million as of December 31, 2023, and as disclosed by management, the goodwill associated with the Framebridge reporting unit was $60.9 million as of December 31, 2023. Management reviews goodwill for possible impairment at least annually, as of November 30, or between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying value. An impairment charge is recognized for the amount by which the carrying value exceeds the reporting unit’s fair value. The quantitative goodwill impairment analysis at Framebridge indicated the estimated fair value of the reporting unit exceeded its carrying value as of September 30, 2023, the interim goodwill impairment assessment date. Management uses a discounted cash flow model, and, where appropriate, a market value approach is also utilized to supplement the discounted cash flow model, to determine the estimated fair value of the reporting units. Management makes assumptions regarding estimated future cash flows, discount rates, long-term growth rates, and market values to determine the estimated fair value of each reporting unit.

The principal considerations for our determination that performing procedures relating to the interim goodwill impairment assessment of the Framebridge reporting unit is a critical audit matter are (i) the significant judgment by management when developing the fair value estimate of the Framebridge reporting unit (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to the estimated future cash flows and the discount rate used in the discounted cash flow model; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessment, including controls over the valuation of the Framebridge reporting unit. These procedures also included, among others, (i) testing management’s process for developing the fair value estimate of the Framebridge reporting unit; (ii) evaluating the appropriateness of the discounted cash flow model used by management; (iii) testing the completeness and accuracy of underlying data used in the discounted cash flow model; and (iv) evaluating the reasonableness of the significant assumptions related to the estimated future cash flows and the discount rate used in the discounted cash flow model. Evaluating management’s assumption related to the estimated future cash flows involved evaluating whether the assumption used by management was reasonable considering (i) the past and present performance of the Framebridge reporting unit; (ii) the consistency with external market and industry data; and (iii) whether the assumption was consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the discounted cash flow model and (ii) the reasonableness of the discount rate assumption.

/s/PricewaterhouseCoopers LLP

Washington, District of Columbia

February 23, 2024

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

CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCKHOLDERS’ EQUITY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND NATURE OF OPERATIONS

Graham Holdings Company (the Company), is a diversified holding company whose operations include educational services, television broadcasting, manufacturing, healthcare, automotive dealerships and other businesses.

Through Kaplan, Inc. (Kaplan), the Company provides a wide variety of educational services to students, schools, colleges, universities and businesses, both domestically and outside the United States (U.S.), including academic preparation programs for international students, English-language programs, operations support services for pre-college, certificate, undergraduate and graduate programs, exam preparation for high school and graduate students and for professional certifications and licensures, career and academic advisement services to businesses, and operates a United Kingdom (U.K.) sixth-form college that prepares students for A-level examinations.

The Company’s television broadcasting segment owns and operates seven television broadcasting stations and provides social media management tools designed to connect newsrooms with their users.

The Company’s manufacturing companies comprise the ownership of a supplier of pressure treated wood, a manufacturer of electrical solutions, a manufacturer of lifting solutions, and a supplier of parts used in electric utilities and industrial systems.

The Company’s healthcare segment provides home health, hospice and palliative services, in-home specialty pharmacy infusion therapies, applied behavior analysis therapy, physician services for allergy, asthma and immunology patients, in-home aesthetics, and healthcare software-as-a-service technology.

The Company’s automotive business comprises eight dealerships and valet repair services.

The Company’s other businesses include an online art gallery and in-person art fair business; an online commerce platform featuring original art and designs on an array of consumer products; an owner and operator of websites; restaurants; a custom framing company; a marketing solutions provider; a customer data and analytics software company; Slate and Foreign Policy magazines; and a daily local news podcast and newsletter company.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation. The accompanying Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles (GAAP) in the U.S. and include the assets, liabilities, results of operations and cash flows of the Company and its majority-owned and controlled subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

Revision of Prior Period Amounts. In the fourth quarter of 2023, the Company identified misstatements previously reported in accounts receivable and deferred revenue that should not have been recorded and certain balances previously reported in deferred revenue that should have been classified within accounts payable and accrued liabilities. The Company determined that these adjustments were not material to the previously issued financial statements, and as a result, the Company revised the Consolidated Balance Sheet and Consolidated Statements of Cash Flows. The impact of these misstatements to the previously reported Consolidated Balance Sheet as of

December 31, 2022 and Consolidated Statements of Cash Flows for the years ended December 31, 2022 and 2021 is shown below. These misstatements had no impact on the previously issued Statements of Operations.

See Note 20 for the impact on the Company’s previously issued Condensed Consolidated Statements of Cash Flows for each of the year-to-date interim periods in 2023.

Use of Estimates. The preparation of financial statements in conformity with GAAP requires management to make estimates and judgments that affect the amounts reported in the financial statements. Management bases its estimates and assumptions on historical experience and on various other factors that are believed to be reasonable under the circumstances. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be affected by changes in those estimates. On an ongoing basis, the Company evaluates its estimates and assumptions.

Business Combinations. The purchase price of an acquisition is allocated to the assets acquired, including intangible assets, and liabilities assumed, based on their respective fair values at the acquisition date. Acquisition-related costs are expensed as incurred. The excess of the cost of an acquired entity over the net of the amounts assigned to the assets acquired and liabilities assumed is recognized as goodwill. The net assets and results of operations of an acquired entity are included in the Company’s Consolidated Financial Statements from the acquisition date.

Cash and Cash Equivalents. Cash and cash equivalents consist of cash on hand, short-term investments with original maturities of three months or less and investments in money market funds with weighted average maturities of three months or less.

Restricted Cash. Restricted cash represents amounts required to be held by non-U.S. higher education institutions for prepaid tuition pursuant to foreign government regulations. These regulations stipulate that the Company has a fiduciary responsibility to segregate certain funds to ensure these funds are only used for the benefit of eligible students.

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

Allowance for Credit Losses. Accounts receivable have been reduced by an allowance that reflects the current expected credit losses associated with the receivables. The current expected credit losses are estimated based on historical write-offs, current macroeconomic conditions and reasonable and supportable forecasts of future economic conditions. Reserves are also established against specific receivables based on aging category, historical collection experience and management’s evaluation of the financial condition of the customer. The Company generally considers an account past due or delinquent when a student or customer misses a scheduled payment. The Company writes off accounts receivable balances deemed uncollectible against the allowance for credit losses following the passage of a certain period of time, or generally when the account is turned over for collection to an outside collection agency.

Investments in Equity Securities. The Company measures its investments in equity securities at fair value with changes in fair value recognized in earnings. The Company elected the measurement alternative to measure cost method investments that do not have readily determinable fair value at cost less impairment, adjusted by observable price changes with any fair value changes recognized in earnings. If the fair value of a cost method investment declines below its cost basis and the decline is considered other than temporary, the Company will record a write-down, which is included in earnings. The Company uses the average cost method to determine the basis of the securities sold.

Fair Value Measurements. Fair value measurements are determined based on the assumptions that a market participant would use in pricing an asset or liability based on a three-tiered hierarchy that draws a distinction between market participant assumptions based on (i) observable inputs, such as quoted prices in active markets (Level 1); (ii) inputs other than quoted prices in active markets that are observable either directly or indirectly (Level 2); and (iii) unobservable inputs that require the Company to use present value and other valuation techniques in the determination of fair value (Level 3). Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measure. The Company’s assessment of the significance of a particular input to the fair value measurements requires judgment and may affect the valuation of the assets and liabilities being measured and their placement within the fair value hierarchy.

For assets that are measured using quoted prices in active markets, the total fair value is the published market price per unit multiplied by the number of units held, without consideration of transaction costs. Assets and liabilities that are measured using significant other observable inputs are primarily valued by reference to quoted prices of similar assets or liabilities in active markets, adjusted for any terms specific to that asset or liability.

The Company measures certain assets—including goodwill; intangible assets; property, plant and equipment; lease right-of-use assets; cost and equity-method investments—at fair value on a nonrecurring basis when they are deemed to be impaired. The fair value of these assets is determined with valuation techniques using the best information available and may include quoted market prices, market comparables and discounted cash flow models.

Fair Value of Financial Instruments. The carrying amounts reported in the Company’s Consolidated Financial Statements for cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued liabilities, the current portion of deferred revenue and the current portion of debt approximate fair value because of the short-term nature of these financial instruments. The fair value of long-term debt is determined based on a number of observable inputs, including the current market activity of the Company’s publicly traded notes, trends in investor demands and market values of comparable publicly traded debt. The fair value of interest rate hedges is determined based on a number of observable inputs, including time to maturity and market interest rates.

Inventories and Contracts in Progress. Inventories and contracts in progress are stated at the lower of cost or net realizable values and are based on the first-in, first-out (FIFO) method. Inventory costs include direct material, direct and indirect labor, and applicable manufacturing overhead. The Company allocates manufacturing overhead based on normal production capacity and recognizes unabsorbed manufacturing costs in earnings. The provision for excess and obsolete inventory is based on management’s evaluation of inventories on hand relative to historical usage, estimated future usage and technological developments.

Vehicle inventory is based on the specific identification method. The cost of new and used vehicle inventories includes the cost of any equipment added, reconditioning and transportation. In certain instances, vehicle manufacturers provide incentives which are reflected as a reduction in the carrying value of each vehicle purchased.

Property, Plant and Equipment. Property, plant and equipment is recorded at cost and includes interest capitalized in connection with major long-term construction projects. Replacements and major improvements are capitalized; maintenance and repairs are expensed as incurred. Depreciation is calculated using the straight-line method over the estimated useful lives of the property, plant and equipment:3 to 20 years for machinery and equipment;20 to 50 years for buildings. The costs of leasehold improvements are amortized over the lesser of their useful lives or the terms of the respective leases.

Evaluation of Long-Lived Assets. The recoverability of long-lived assets and finite-lived intangible assets is assessed whenever adverse events or changes in circumstances indicate that recorded values may not be recoverable. A long-lived asset is considered not to be recoverable when the undiscounted estimated future cash flows are less than the asset’s recorded value. An impairment charge is measured based on estimated fair market value, determined primarily using estimated future cash flows on a discounted basis. Losses on long-lived assets to be disposed of are determined in a similar manner, but the fair market value would be reduced for estimated costs to dispose.

Goodwill and Other Intangible Assets. Goodwill is the excess of purchase price over the fair value of identified net assets of businesses acquired. The Company’s intangible assets with an indefinite life are principally from trade names and trademarks, franchise agreements and Federal Communications Commission (FCC) licenses. Amortized intangible assets are primarily student and customer relationships and trade names and trademarks, with amortization periods up to 15 years. Costs associated with renewing or extending intangible assets are insignificant and expensed as incurred.

The Company reviews goodwill and indefinite-lived intangible assets at least annually, as of November 30, for possible impairment. Goodwill and indefinite-lived intangible assets are reviewed for possible impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit or indefinite-lived intangible asset below its carrying value. The Company tests its goodwill at the reporting unit level, which is an operating segment or one level below an operating segment. The Company initially assesses qualitative factors to determine if it is necessary to perform the goodwill or indefinite-lived intangible asset quantitative impairment review. The Company reviews the goodwill and indefinite-lived assets for impairment using the quantitative process if, based on its assessment of the qualitative factors, it determines that it is more likely than not that the fair value of a reporting unit or indefinite-lived intangible asset is less than its carrying value, or if it decides to bypass the qualitative assessment. The Company uses a discounted cash flow model, and, where appropriate, a market value approach is also utilized to supplement the discounted cash flow model, to determine the estimated fair value of its reporting units and indefinite-lived intangible assets. The Company makes assumptions regarding estimated future cash flows, discount rates, long-term growth rates and market values to determine the estimated fair value of each reporting unit and indefinite-lived intangible asset. If these estimates or related assumptions change in the future, the Company may be required to record impairment charges.

Investments in Affiliates. The Company uses the equity method of accounting for its investments in and earnings or losses of affiliates that it does not control, but over which it exerts significant influence. Significant influence is generally deemed to exist if the Company has an ownership interest in the voting stock of an investee between 20% and 50%. The Company also uses the equity method of accounting for its investments in a partnership or limited liability company with specific ownership accounts, if the Company has an ownership interest of 3% or more. The Company considers whether the fair values of any of its equity method investments have declined below their carrying values whenever adverse events or changes in circumstances indicate that recorded values may not be recoverable. If the Company considered any such decline to be other than temporary (based on various factors, including historical financial results, product development activities and the overall health of the affiliate’s industry), a write-down would be recorded to estimated fair value. The Company records its share of the earnings or losses of its affiliates from their most recent available financial statements. In some instances, the reporting period of the affiliates’ financial statements lag the Company’s reporting period, but such lag is never more than three months.

Revenue Recognition. The Company identifies a contract for revenue recognition when there is approval and commitment from both parties, the rights of the parties and payment terms are identified, the contract has commercial substance and the collectability of consideration is probable. The Company evaluates each contract to determine the number of distinct performance obligations in the contract, which requires the use of judgment.

Education Revenue. Education revenue is primarily derived from postsecondary education and supplementary education services provided both domestically and abroad. Generally, tuition and other fees are paid upfront and recorded in deferred revenue in advance of the date when education services are provided to the student. In some instances, installment billing is available to students, which reduces the amount of cash consideration received in advance of performing the service. The contractual terms and conditions associated with installment billing indicate that the student is liable for the total contract price; therefore, mitigating the Company’s exposure to losses associated with nonpayment. The Company determined the installment billing does not represent a significant financing component.

Kaplan International. Kaplan International provides higher education, professional education, and test preparation services and materials to students primarily in the U.K., Singapore, and Australia. Some Kaplan International contracts consist ofone performance obligation that is a combination of indistinct promises to the student, while other Kaplan International contracts include multiple performance obligations as the promises in the contract are capable of being both distinct and distinct within the context of the contract. One Kaplan International business offers an option whereby students receive future services at a discount that is accounted for as a material right.

The transaction price is stated in the contract and known at the time of contract inception; therefore, no variable consideration exists. Revenue is allocated to each performance obligation based on its standalone selling price. Any discounts within the contract are allocated across all performance obligations unless observable evidence exists that the discount relates to a specific performance obligation or obligations in the contract. Kaplan International generally determines standalone selling prices based on prices charged to students.

Revenue is recognized ratably over the instruction period or access period for higher education, professional education and test preparation services. Kaplan International generally uses the time elapsed method, an input measure, as it best depicts the simultaneous consumption and delivery of these services. Course materials determined to be a separate performance obligation are recognized at the point in time when control transfers to the student, generally when the products are delivered to the student.

One Kaplan International business has a contract with a customer consisting oftwo performance obligations which consisted entirely of variable consideration at contract inception. The Company allocates revenue to each performance obligation based on the expected cost plus a margin. The margin was determined by a market assessment performed at contract inception. Revenue is recognized over time, using an input method, as the customer simultaneously benefits from the services as delivery occurs. The Company records a contract asset associated with this Kaplan International contract as the right to revenue is dependent on something other than the passage of time.

Kaplan Higher Education (KHE). KHE primarily provides non-academic operations support services to Purdue University Global (Purdue Global) pursuant to a Transition and Operations Support Agreement (TOSA). This contract has a 30-year term and consists ofone performance obligation, which represents a series of daily promises to provide support services to Purdue Global. The transaction price is entirely made up of variable consideration related to the reimbursement of KHE support costs and the KHE fee. The TOSA outlines a payment structure, which dictates how cash will be distributed at the end of Purdue Global’s fiscal year, which is the 30th of June. The collectability of the KHE support costs and KHE fee is entirely dependent on the availability of cash at the end of the fiscal year. This variable consideration is constrained based on fiscal year forecasts prepared for Purdue Global. The forecasts are updated throughout the fiscal year until the uncertainty is ultimately resolved, which is at the end of each Purdue Global fiscal year. As KHE’s performance obligation is made up of a series, the variable consideration is allocated to the distinct service period to which it relates, which is the Purdue Global fiscal year.

Support services revenue is recognized over time based on the expenses incurred to date and the percentage of expected reimbursement. KHE fee revenue is also recognized over time based on the amount of Purdue Global revenue recognized to date and the percentage of fee expected to be collected for the fiscal year. The Company used these input measures as Purdue Global simultaneously receives and consumes the benefits of the services provided by KHE.

Kaplan Supplemental Education. Supplemental Education offers test preparation services and materials to students, as well as professional training and exam preparation for professional certifications and licensures to students. Generally, Supplemental Education contracts consist of multiple performance obligations as promises for these services are distinct within 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. Supplemental Education generally determines standalone selling prices based on the prices charged to students and professionals. Any discounts within the contract are allocated across all performance obligations unless observable evidence exists that the discount relates to a specific performance obligation in the contract.

Supplemental Education services revenue is recognized ratably over the period of access to the education materials. An estimate of the average access period is developed for each course, and this estimate is evaluated on an ongoing basis and adjusted as necessary. The time elapsed method, an input measure, is used as it best depicts the simultaneous consumption and availability of access to the services. Revenue associated with distinct course materials is recognized at the point in time when control transfers to the student, generally when products are delivered to the student.

Supplemental Education offers a guarantee on certain courses that gives students the ability to repeat a course if they are not satisfied with their exam score. The Company accounts for this guarantee as a separate performance obligation.

Television Broadcasting Revenue. Television broadcasting revenue at Graham Media Group (GMG) is primarily comprised of television and internet advertising revenue and retransmission revenue.

Television Advertising Revenue. GMG accounts for the series of advertisements included in television advertising contracts asone performance obligation and recognizes advertising revenue over time. The Company elected the right to invoice practical expedient, an output method, as GMG has the right to consideration that equals the value provided to the customer for advertisements delivered to date. As a result of the election to use the right to invoice practical expedient, GMG does not determine the transaction price or allocate any variable consideration at contract inception. Rather, GMG recognizes revenue commensurate with the amount to which it has the right to invoice the customer. Payment is typically received in arrears within 60 days of revenue recognition.

Retransmission Revenue. Retransmission revenue represents compensation paid by cable, satellite and other multichannel video programming distributors (MVPDs) to retransmit GMG’s stations’ broadcasts in their designated market areas. The retransmission rights granted to MVPDs are accounted for as a license of functional intellectual property as the retransmitted broadcast provides significant standalone functionality. As such, each retransmission contract with an MVPD includesone performance obligation for each station’s retransmission license. GMG recognizes revenue using the usage-based royalty method, in which revenue is recognized in the month the broadcast is retransmitted based on the number of MVPD subscribers and the applicable per-user rate identified in the retransmission contract. Payment is typically received in arrears within 60 days of revenue recognition.

Manufacturing Revenue. Manufacturing revenue consists primarily of product sales generated byfour businesses: Hoover, Dekko, Joyce, and Forney. The Company has determined that each item ordered by the customer is a distinct performance obligation as it has standalone value and is distinct within the context of the contract. For arrangements with multiple performance obligations, the Company initially allocates the transaction price to each obligation based on its standalone selling price, which is the retail price charged to customers. Any discounts within the contract are allocated across all performance obligations unless observable evidence exists that the discount relates to a specific performance obligation or obligations in the contract.

The Company sells some products and services with a right of return. This right of return constitutes variable consideration and is constrained from revenue recognition on a portfolio basis, using the expected value method until the refund period expires.

The Company recognizes revenue when or as control transfers to the customer. Some manufacturing revenue is recognized ratably over the manufacturing period, if the product created for the customer does not have an alternative use for the Company and the Company has an enforceable right to payment for performance completed to date. The determination of the method by which the Company measures its progress toward the satisfaction of its performance obligations requires judgment. The Company measures its progress for these products using the units delivered method, an output measure. These arrangements represented 19%,21%, and 21% of the manufacturing revenue recognized for the years ended December 31, 2023, 2022 and 2021, respectively.

Other manufacturing revenue is recognized at the point in time when control transfers to the customer, generally when the products are shipped. Some customers have a bill-and-hold arrangement with the Company. Revenue for bill and hold arrangements is recognized when control transfers to the customer, even though the customer does not have physical possession of the goods. Control transfers when the bill-and-hold arrangement has been requested from the customer, the product is identified as belonging to the customer and is ready for physical transfer, and the product cannot be directed for use by anyone but the customer.

Payment terms and conditions vary by contract, although terms generally include a requirement of payment within 90 days of delivery.

The Company evaluated the terms of the warranties and guarantees offered by its manufacturing businesses and determined that these should not be accounted for as a separate performance obligation as a distinct service is not identified.

Healthcare Revenue. The Company contracts with patients to provide home health or hospice services. Payment is typically received from third-party payors such as Medicare, Medicaid, and private insurers. The payor is a third party to the contract that stipulates the transaction price of the contract. The Company identifies the patient as the party who benefits from its healthcare services and as such, the patient is its customer.

Home health services contracts generally haveone performance obligation to provide home health services to patients. The Company recognizes revenue using the right to invoice practical expedient, an output method, as the contractual right to revenue corresponds directly with the transfer of services to the patient. Given the election of the practical expedient, the Company does not determine the transaction price 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 customer, which is a function of the average length of stay within each of the two 30-day payment periods. Payment is typically received from Medicare within 30 days after a claim is filed. Medicare is the most common third-party payor for home health services.

Home health revenue contracts may be modified to account for changes in the patient’s plan of care. The Company identifies contract modifications when the modification changes the existing enforceable rights and obligations. As modifications to the plan of care modify the original performance obligation, the Company accounts for the contract modification as an adjustment to revenue (either as an increase in or a reduction of revenue) on a cumulative catch-up basis.

Hospice services contracts generally haveone performance obligation to provide healthcare services to patients. The transaction price reflects the amount of revenue the Company expects to receive in exchange for providing these services. As the transaction price for healthcare services is known at the time of contract inception, no variable consideration exists. Hospice service revenue is recognized ratably over the period of care. The Company generally uses the time-elapsed method, an input measure as it best depicts the simultaneous delivery and consumption of healthcare services. Payment is received from third-party payors for hospice services within 60 days after a claim is filed, or in some cases in two installments, one during the contract and one after the services have been provided. Medicare is the most common third-party payor.

Other Revenue. The Company recognizes revenue associated with management services it provides to its affiliates. The Company accounts for the management services provided asone 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.

Automotive Revenue. The automotive subsidiary generates revenue primarily through the sale of new and used vehicles, the arrangement of vehicle financing, insurance and other service contracts (F&I revenue) and the performance of vehicle repair and maintenance services.

New and used vehicle revenue contracts generally containone performance obligation to deliver the vehicle to the customer in exchange for the stated contract consideration. Revenue is recognized at the point in time when control of the vehicle passes to the customer. F&I revenue is recognized at the point in time when the agreement between the customer and financing, insurance or service provider is executed. As the automotive subsidiary acts as an agent in these F&I revenue transactions, revenue is recognized net of any financing, insurance and service provider costs. Repair and maintenance services revenue is recognized over time, as the service is performed.

Other Revenue. Restaurant Revenue. Restaurant revenues consist of sales generated by Clyde’s Restaurant Group (CRG). Food and beverage revenue, net of discounts and taxes, is recognized at the point in time when it is delivered to the customer. Proceeds from the sale of gift cards are recorded as deferred revenue and recognized as revenue upon redemption by the customer.

Custom Framing Services Revenue. Framebridge sells custom framing solutions to customers. Custom framing services revenue, net of discounts and taxes, is recognized when the products are delivered to the customer. Proceeds from the sale of gift cards are recorded as deferred revenue and recognized as revenue upon redemption by the customer.

Code3 Revenue. Code3 generates media management revenue in exchange for providing social media marketing solutions to its clients. The Company determined that Code3 contracts generally haveone 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.

Code3 recognizes revenue, net of media acquisition costs, over time as media management services are delivered to the customer. Generally, Code3 recognizes revenue using the right to invoice practical expedient, an output method, as Code3’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, Code3 does not determine the transaction price or allocate any variable consideration at contract inception. Rather, Code3 recognizes revenue commensurate with the amount to which it has the right to invoice the customer which is a function of the cost of social media placement plus a management fee, less any applicable discounts. Payment is typically received within 100 days of revenue recognition.

Code3 evaluates whether it is the principal (i.e. presents revenue on a gross basis) or agent (i.e. presents revenue on a net basis) in its contracts. Code3 presents revenue for media management services, net of media acquisition costs, as an agent, as Code3 does not control the media before placement on social media platforms.

World of Good Brands (WGB) Revenue. Revenue is primarily derived from advertisements displayed on WGB’s online media properties. Revenue is recognized over time as the performance obligation is delivered. Revenue is generally recognized based on an output measure including impressions delivered, cost per click or time-based advertisements.

Society6 Revenue. Revenue is primarily derived from the sale of products. Each product ordered is generally accounted for as an individual performance obligation. Product revenue, net of discounts and taxes, is recognized when control of the promised good is transferred to the customer.

Saatchi Revenue. Commissions revenue is primarily derived through the sale of artwork through Saatchi’s online art gallery or in-person art fairs. Each individual art piece ordered is generally accounted for as an individual performance obligation. Revenue is recognized net of artist fees when control of the promised good is transferred to the customer.

Other Revenue. Other revenue primarily includes advertising, circulation and subscription revenue from Slate, Decile, Pinna and Foreign Policy. The Company accounts for other advertising revenues consistently with the advertising revenue streams addressed above. Circulation revenue consists of fees that provide customers access to online and print publications. The Company recognizes circulation and subscription revenue ratably over the subscription period beginning on the date that the publication or product is made available to the customer. Circulation revenue contracts are generally annual or monthly subscription contracts that are paid in advance of the delivery of performance obligations.

Revenue Policy Elections. The Company has elected to account for shipping and handling activities that occur after the customer has obtained control of the good as a fulfillment cost rather than as an additional promised service. Therefore, revenue for these performance obligations is recognized when control of the good transfers to the customer, which is when the good is ready for shipment. The Company accrues the related shipping and handling costs over the period when revenue is recognized.

The Company has elected to exclude from the measurement of the transaction price all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by the entity from a customer.

Revenue Practical Expedients. The Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length ofone year or less, (ii) contracts for which the amount of revenue recognized is based on the amount to which the Company has the right to invoice the customer for services performed, (iii) contracts for which the consideration received is a usage-based royalty promised in exchange for a license of intellectual property and (iv) contracts for which variable consideration is allocated entirely to a wholly unsatisfied promise to transfer a distinct good or service that forms part of a single performance obligation.

Costs to Obtain a Contract. The Company incurs costs to obtain a contract that are both incremental and expected to be recovered as the costs would not have been incurred if the contract was not obtained and the revenue from the contract exceeds the associated cost. The revenue guidance provides a practical expedient to expense sales commissions as incurred in instances where the amortization period is one year or less. The amortization period is defined in the guidance as the contract term, inclusive of any expected contract renewal periods. The Company has elected to apply this practical expedient to all contracts except for contracts in its education division. In the education division, costs to obtain a contract are amortized over the applicable amortization period except for cases in which commissions paid on initial contracts and renewals are commensurate. The Company amortizes these costs to obtain a contract on a straight-line basis over the amortization period. These expenses are included as cost of services or products in the Company’s Consolidated Statements of Operations.

Leases. The Company has operating leases for substantially all of its educational facilities, corporate offices and other facilities used in conducting its business, as well as certain equipment. The Company determines if an arrangement is a lease at inception. Operating leases are included in lease right-of-use (ROU) assets, current portion of lease liabilities, and lease liabilities on the Company’s Consolidated Balance Sheets. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. ROU assets also include any initial direct costs, prepaid lease payments and lease incentives received, when applicable. As most of the Company’s leases do not provide an implicit rate, the Company used its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of lease payments. The Company used the incremental borrowing rate on December 31, 2018 for operating leases that commenced prior to that date.

The Company’s lease terms may include options to extend or terminate the lease byone to 10 years or more when it is reasonably certain that the option will be exercised. Leases with a term of twelve months or less are not recorded on the balance sheet; however, lease expense for these leases is recognized on a straight-line basis. The Company has elected the practical expedient to not separate lease components from nonlease components. As such, lease expense includes these nonlease components, when applicable. Fixed lease expense is recognized on a straight-line basis over the lease term. Variable lease expense is recognized when incurred. The Company’s lease agreements do not contain any significant residual value guarantees or restrictive covenants. In some instances, the Company subleases its leased real estate facilities to third parties. The Company has several restaurant leases with an entity affiliated with some of CRG’s senior managers and some automotive leases with an entity affiliated with automotive’s minority shareholder.

Finance leases are included in property, plant and equipment, net, accounts payable and accrued liabilities and other liabilities on the Company’s Consolidated Balance Sheets. The Company primarily has finance leases for its vehicle fleet at the healthcare subsidiary and service loaner vehicles at the automotive subsidiary. Service loaner vehicles are generally purchased from the lessor within six months of contract commencement and upon purchase, the vehicles are placed into used vehicle inventory at cost. As of December 31, 2023 and 2022, the Company had $10.9 million and $5.4 million, respectively, in net, property, plant and equipment and current finance lease liabilities related to service loaner vehicles at the automotive subsidiary.

Pensions and Other Postretirement Benefits. The Company maintains various pension and incentive savings plans. Most of the Company’s employees are covered by these plans. The Company also provides healthcare and life insurance benefits to certain retired employees. These employees become eligible for benefits after meeting age and service requirements.

The Company recognizes the overfunded or underfunded status of a defined benefit postretirement plan as an asset or liability in its Consolidated Balance Sheets and recognizes changes in that funded status in the year in which the changes occur through comprehensive income. The Company measures changes in the funded status of its plans using the projected unit credit method and several actuarial assumptions, the most significant of which are the discount rate, the expected return on plan assets and the rate of compensation increase. The Company uses a measurement date of December 31 for its pension and other postretirement benefit plans.

Self-Insurance. The Company uses a combination of insurance and self-insurance for a number of risks, including claims related to employee healthcare and dental care, disability benefits, workers’ compensation, general liability, property damage and business interruption. Liabilities associated with these plans are estimated based on, among other things, the Company’s historical claims experience, severity factors and other actuarial assumptions. The expected loss accruals are based on estimates, and, while the Company believes that the amounts accrued are adequate, the ultimate loss may differ from the amounts provided.

Income Taxes. The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

The Company records net deferred tax assets to the extent that it believes these assets will more likely than not be realized. In making such determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations; this evaluation is made on an ongoing basis. In the event the Company were to determine that it was able to realize net deferred income tax assets in the future in excess of their net recorded amount, the Company would record an adjustment to the valuation allowance, which would reduce the provision for income taxes.

The Company recognizes a tax benefit from an uncertain tax position when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. The Company records a liability for the difference between the benefit recognized and measured for financial statement purposes and the tax position taken or expected to be taken on the Company’s tax return. Changes in the estimate are recorded in the period in which such determination is made.

Foreign Currency Translation. Income and expense accounts of the Company’s non-U.S. operations where the local currency is the functional currency are translated into U.S. dollars using the current rate method, whereby operating results are converted at the average rate of exchange for the period, and assets and liabilities are converted at the closing rates on the period end date. Gains and losses on translation of these accounts are accumulated and reported as a separate component of equity and other comprehensive income. Gains and losses on foreign currency transactions, including foreign currency denominated intercompany loans on entities with a functional currency in U.S. dollars, are recognized in the Consolidated Statements of Operations.

Equity-Based Compensation. The Company measures compensation expense for awards settled in shares based on the grant date fair value of the award. The Company measures compensation expense for awards settled in cash, or that may be settled in cash, based on the fair value at each reporting date. The Company recognizes the expense over the requisite service period, which is generally the vesting period of the award. Stock award forfeitures are accounted for as they occur.

Earnings Per Share. Basic earnings per share is calculated under the two-class method. The Company treats restricted stock as a participating security due to its nonforfeitable right to dividends. Under the two-class method, the Company allocates to the participating securities their portion of dividends declared and undistributed earnings to the extent the participating securities may share in the earnings as if all earnings for the period had been distributed. Basic earnings per share is calculated by dividing the income available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated similarly except that the weighted average number of common shares outstanding during the period includes the dilutive effect of the assumed exercise of options and restricted stock issuable under the Company’s stock plans. The dilutive effect of potentially dilutive securities is reflected in diluted earnings per share by application of the treasury stock method.

Mandatorily Redeemable Noncontrolling Interest. The mandatorily redeemable noncontrolling interest represents the ownership portion of a group of minority shareholders, consisting of a group of senior managers of the healthcare business, in subsidiaries of Graham Healthcare Group (GHG). The Company established GHC One LLC (GHC One) and GHC Two LLC (GHC Two) as vehicles to invest in a portfolio of healthcare businesses together with the group of senior managers of GHG. As the holder of preferred units, the Company is obligated to contribute 95% of the capital required for the acquisition of portfolio investments with the remaining 5% of the capital coming from the group of senior managers. The operating agreements of GHC One and GHC Two require the dissolution of the entities on March 31, 2026, and March 31, 2029, respectively, at which time the net assets will be distributed to its members. As a preferred unit holder, the Company will receive an amount up to its contributed capital plus a preferred annual return of 8% (guaranteed return) after the group of senior managers has received the redemption of their 5% interest in net assets (manager return). All distributions in excess of the manager and guaranteed return will be paid to common unit holders, which currently comprise the group of senior managers of GHG. The Company may convert its preferred units to common units at any time after which it will receive 80% of all distributions in excess of the manager return, with the remaining 20% of excess distributions going to the group of senior managers as holders of the other common units. The mandatorily redeemable noncontrolling interest is reported as a noncurrent liability at December 31, 2023 and 2022 in the Consolidated Balance Sheets. The Company presents this liability at fair value, which is computed quarterly at the current redemption value. Changes in the redemption value are recorded as interest expense or income in the Company’s Consolidated Statement of Operations.

Redeemable Noncontrolling Interest. The Company’s redeemable noncontrolling interest represents the noncontrolling interest in CSI Pharmacy Holding Company, LLC (CSI), which is 86.7% owned, Framebridge, which is 93.4% owned, Weiss, which is 50.1% owned and Skin Clique, which is 51% owned.

CSI’s minority shareholders may put up to 50% of their shares to the Company. The first put period began in 2022. A second put period for another tranche of shares begins in 2024. In December 2023, the Company acquired some of the minority-owned shares of CSI for a total amount of $20.0 million. Prior to the redemption, the Company owned 76.5% of CSI. In November 2022, a CSI minority shareholder put some shares to the Company, which had a redemption value of $1.2 million. Prior to the redemption, the Company owned 75% of CSI. The minority shareholder of Framebridge has an option to put 20% of the shares to the Company annually starting in 2024. The minority shareholder of Weiss has an option to put 10% of the shares to the Company annually starting in 2026 and may put all of the shares starting in 2033. The minority shareholders of Skin Clique have the option to put all or a portion of their shares to the Company starting in 2029 and ending in 2032. In March 2021, Hoover’s minority shareholders put the remaining outstanding shares to the Company. Following the redemption, the Company owns 100% of Hoover. Prior to the redemption, the Company owned 98.01% of Hoover. The Company presents the redeemable noncontrolling interests at the greater of its carrying amount or redemption value at the end of each reporting period in the Consolidated Balance Sheets. Changes in the redemption value are recorded as capital in excess of par value in the Company’s Consolidated Balance Sheets.

Comprehensive Income. Comprehensive income consists of net income, foreign currency translation adjustments, net changes in cash flow hedges, and pension and other postretirement plan adjustments.

Recently Adopted and Issued Accounting Pronouncements. In September 2022, the Financial Accounting Standards Board (FASB) issued new guidance that requires a buyer in a supplier finance program to disclose certain qualitative and quantitative information about the program’s nature, activity during the period, changes made from period to period, and potential magnitude. The standard was adopted by the Company in the first quarter of 2023 and did not have a significant impact on its Consolidated Financial Statements.

In November 2023, the FASB issued new guidance that requires enhanced disclosures related to reportable segments that includes, among other disclosures, identifying significant segment expenses on an annual and interim basis. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted and the guidance must be applied retrospectively to all prior periods presented in the financial statements. The Company is in the process of evaluating the impact of this new guidance on the disclosures within its Consolidated Financial Statements.

In December 2023, the FASB issued new guidance that requires enhanced income tax disclosures related to the rate reconciliation, information on income taxes paid and other items. The guidance is effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The standard permits both prospective and retrospective application. The Company is in the process of evaluating the impact of this new guidance on the disclosures within its Consolidated Financial Statements.

Other new accounting pronouncements issued but not effective until after December 31, 2023, are not expected to have a material impact on the Company’s Consolidated Financial Statements.

3. ACQUISITIONS AND DISPOSITIONS OF BUSINESSES

Acquisitions. During 2023, the Company acquired five businesses: three in healthcare, one in automotive, andone in other businesses for $83.3 million in cash and contingent consideration and the assumption of floor plan payables. The assets and liabilities of the companies acquired were recorded at their estimated fair values at the date of acquisition.

In January 2023, GHG acquiredtwo small businesses which are included in healthcare.

In July 2023, the Company acquiredone small business which is included in other businesses.

In September 2023, the Company’s automotive subsidiary acquired a Toyota automotive dealership, including the real property for the dealership operations. In addition to a cash payment and the assumption of $2.2 million in floor plan payables, the automotive subsidiary borrowed $37.0 million to finance the acquisition. The dealership is operated and managed by an entity affiliated with Christopher J. Ourisman, a member of the Ourisman Automotive Group family of dealerships. This acquisition expands the Company’s automotive business operations and is included in automotive.

In December 2023, GHG acquiredone small business which is included in healthcare.

During 2022, the Company acquired seven businesses: five in healthcare andtwo in automotive, for $143.2 million in cash and contingent consideration and the assumption of floor plan payables. The assets and liabilities of the companies acquired were recorded at their estimated fair values at the date of acquisition.

In May 2022, GHG acquiredtwo small businesses which are included in healthcare.

On July 5, 2022, the Company’s automotive subsidiary acquiredtwo automotive dealerships, including the real property for the dealership operations. In addition to a cash payment and the assumption of $10.9 million in floor plan payables, the automotive subsidiary borrowed $77.4 million to finance the acquisition. The dealerships are operated and managed by an entity affiliated with Christopher J. Ourisman, a member of the Ourisman Automotive Group family of dealerships. These acquisitions expand the Company’s automotive business operations and are included in automotive.

In July 2022, GHG acquired a 100% interest in a multi-state provider of Applied Behavior Analysis clinics. The acquisition is expected to expand the product offerings of the healthcare division and is included in healthcare.

In August 2022, GHG acquiredtwo small businesses which are included in healthcare.

During 2021, the Company acquiredsix businesses: two in education, two in healthcare, one in automotive, andone in other businesses for $392.4 million in cash and contingent consideration and the assumption of floor plan payables. The assets and liabilities of the companies acquired were recorded at their estimated fair values at the date of the acquisition.

On June 14, 2021, the Company acquired all of the outstanding common shares of Leaf Group Ltd. (Leaf) for $308.6 million in cash and the assumption of $9.2 million in liabilities related to their previous stock compensation plan, which was paid subsequent to the acquisition. Leaf is a consumer internet company that builds creator-driven brands in lifestyle and home and art design categories. The acquisition was expected to provide benefits in the future by diversifying the Company’s business operations and providing operating synergies with other business units. The Company includes the Leaf operations in other businesses.

Kaplan acquired certain assets of Projects in Knowledge, a continuing medical education provider for healthcare professionals, and another small business in November 2021. These acquisitions are expected to build upon Kaplan’s existing customer base in the medical and test preparation fields. Both businesses are included in Kaplan’s supplemental education division.

In December 2021, GHG acquiredtwo businesses, a home health business in Florida and a 50.1% interest in Weiss, a physician practice specializing in allergies, asthma and immunology. The minority shareholder of Weiss has an option to put 10% of the shares to the Company annually starting in 2026 and may put all of the shares starting in 2033. The fair value of the redeemable noncontrolling interest in Weiss was $6.6 million at the acquisition date, determined using an income approach. These acquisitions are expected to expand the market the healthcare division serves and are included in healthcare.

On December 28, 2021, the Company’s automotive subsidiary acquired a Ford automotive dealership for cash and the assumption of $16.6 million in floor plan payables. In connection with the acquisition, the automotive subsidiary of the Company borrowed $22.5 million to finance the acquisition. The dealership is operated and managed by an entity affiliated with Christopher J. Ourisman, a member of the Ourisman Automotive Group family of dealerships. The acquisition expands the Company’s automotive business operations and is included in automotive.

Acquisition-related costs for acquisitions that closed during 2023, 2022 and 2021 were $1.2 million, $1.7 million and $3.0 million, respectively, and were expensed as incurred. The aggregate purchase price of these acquisitions was allocated as follows, based on acquisition date fair values to the following assets and liabilities:

The 2021 fair values include measurement period adjustments related to accounts receivable, goodwill, amortized intangible assets, current and noncurrent lease liabilities, deferred income taxes and contingent consideration. Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the estimated future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. The goodwill recorded due to these acquisitions is attributable to the assembled workforces of the acquired companies and expected synergies. The Company expects to deduct $45.0 million, $39.7 million and $80.6 million of goodwill for income tax purposes for the acquisitions completed in 2023, 2022 and 2021, respectively.

The acquired companies were consolidated into the Company’s financial statements starting on their respective acquisition dates. The Company’s Consolidated Statements of Operations include aggregate revenue and operating income of $45.2 million and $2.2 million, respectively, for the year ended December 31, 2023. The following unaudited pro forma financial information presents the Company’s results as if the current year acquisitions had occurred at the beginning of 2022. The unaudited pro forma information also includes the 2022 acquisitions as if they occurred at the beginning of 2021 and the 2021 acquisitions as if they had occurred at the beginning of 2020:

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.

Disposition of Businesses. In June 2023, the Company entered into an agreement to merge the Pinna business with Realm of Possibility, Inc. (Realm) in return for an additional noncontrolling financial interest in Realm (the Pinna transaction). The Company deconsolidated the Pinna subsidiary, which was included in other businesses, and continues to account for its interest in Realm under the equity method of accounting (see Notes 4 and 16).

In October 2022, the Company entered into an agreement to merge the CyberVista business with CyberWire, Inc. in return for a noncontrolling financial interest in the merged entity, N2K Networks, Inc. (the CyberVista transaction). The Company deconsolidated the CyberVista subsidiary, which was included in other businesses, and accounts for its continuing interest in N2K Networks under the equity method of accounting (see Notes 4 and 16).

Other Transactions. In December 2023, the Company acquired some of the minority-owned shares of CSI for a total amount of $20.0 million. The Company paid cash of $5.0 million and entered into a promissory note with the minority owners for the remaining $15.0 million at an interest rate of 8% per annum. The note is included in other indebtedness (see Note 11) and payable in quarterly installments with the final payment due by January 1, 2027. Following the redemption, the Company owns 86.7% of CSI.

In November 2022, a CSI minority shareholder put some shares to the Company, which had a redemption value of $1.2 million. Following the redemption, the Company owned 76.5% of CSI. In March 2021, Hoover’s minority shareholders put the remaining outstanding shares to the Company, which had a redemption value of $3.5 million. Following the redemption, the Company owns 100% of Hoover.

As of December 31, 2023, the Company holds a controlling financial interest in GHC One and GHC Two and therefore includes the assets, liabilities, results of operations and cash flows in its consolidated financial statements. GHC One acquired CSI and another small business during 2019. GHC Two acquired Weiss during 2021 and a provider of Applied Behavior Analysis clinics and another small business in 2022. The Company accounts for the minority ownership of the group of senior managers in GHC One and GHC Two as a mandatorily redeemable noncontrolling interest (see Note 2).

4. INVESTMENTS

Money Market Investments. As of December 31, 2023 and 2022, the Company had money market investments of $5.6 million and $7.7 million, respectively, that are classified as cash and cash equivalents in the Company’s Consolidated Balance Sheets.

Investments in Marketable Equity Securities. Investments in marketable equity securities consist of the following:

At December 31, 2023 and 2022, the Company owned 55,430 shares in Markel Group Inc. (Markel) valued at $78.7 million and $73.0 million, respectively. The Chief Executive Officer of Markel, Mr. Thomas S. Gayner, is a member of the Company’s Board of Directors. As of December 31, 2023, the Company owned 422 Class A and 482,945 Class B shares in Berkshire Hathaway valued at $401.2 million, which exceeded 5% of the Company’s total assets.

The Company purchased $4.6 million, $42.1 million, of which $1.5 million was settled in January 2023, and $48.0 million of marketable equity securities during 2023, 2022 and 2021, respectively.

During 2023, 2022 and 2021, the gross cumulative realized net gains from the sales of marketable equity securities were $13.0 million, $58.1 million and $46.0 million, respectively. The total proceeds from such sales were $62.0 million, $102.0 million and $65.5 million, respectively.

The net gain (loss) on marketable equity securities comprised the following:

Investments in Affiliates. In June 2023, the Company entered into an agreement to merge the Pinna business with Realm in return for an additional noncontrolling financial interest in Realm. The Company held an equity interest in Realm prior to the merger transaction, which was accounted for under the equity method. Following the merger transaction, the Company’s convertible note in Realm was converted into equity and the Company also made an additional investment in Realm. As of December 31, 2023, the Company held a 42.2% interest in Realm on a fully diluted basis, and continues to account for its investment under the equity method.

As of December 31, 2023, the Company held a 49.9% interest in N2K Networks on a fully diluted basis, and accounts for its investment under the equity method. The Company holds two of the five seats of N2K Networks’ governing board with the other shareholders retaining substantive participation rights to control the financial and operating decisions of N2K Networks through their representation on the board.

As of December 31, 2023, the Company held an approximate 18% interest in Intersection Holdings, LLC (Intersection), and accounts for its investment under the equity method. The Company holds two of the ten seats of Intersection’s governing board, which allows the Company to exercise significant influence over Intersection. In April 2023, the Company entered into a term note agreement to loan Intersection $30.0 million at an interest rate of 9% per annum. The principal and interest on the note are payable in monthly installments over 5 years with the final payment due by May 2028. The outstanding balance on this loan was $28.8 million as of December 31, 2023.

As of December 31, 2023, the Company also held investments in several other affiliates; GHG held a 40% interest in Residential Home Health Illinois, a 40% interest in Residential Hospice Illinois, a 40% interest in the joint venture formed between GHG and a Michigan hospital, and a 40% interest in the joint venture formed between GHG and Allegheny Health Network (AHN). During the first quarter of 2022, GHG invested an additional $18.5 million in the Residential Home Health Illinois and Residential Hospice Illinois affiliates to fund their acquisition of certain home health and hospice assets of the NorthShore University HealthSystem. The transaction diluted GHG’s interest in Residential Hospice Illinois resulting in a $0.6 million gain on sale of investment in affiliate (see Note 16). For the years ended December 31, 2023, 2022 and 2021, GHG recorded $15.6 million, $13.9 million and $10.9 million, respectively, in revenue for services provided to its affiliates.

The Company had$36.9 million and $49.1 million in its investment account that represents cumulative undistributed income in its investments in affiliates as of December 31, 2023 and 2022, respectively.

In the third quarter of 2021, the Company recorded an impairment charge of $6.6 million onone of its investments in affiliatesas a result of the challenging economic environment for this business following an announcement by the Chinese government to reform the education sector for private education companies.

Additionally, Kaplan International Holdings Limited (KIHL) held a 45% interest in a joint venture formed with University of York. KIHL loaned the joint venture £22 million, which loan is repayable over 25 years at an interest rate of 7% and guaranteed by the University of York. The outstanding balance on this loan was£19.9 million as of December 31, 2023. The loan is repayable by December 2041.

Summarized Financial Data of Nonconsolidated Affiliates. The Company’s investments in affiliates consists of investments in private equity funds and other operating entities that it does not control, but over which it exerts significant influence. The following tables present summarized financial data for the Company’s nonconsolidated affiliates. The amounts included in the tables below present 100% of the balance sheets and the results of operations of such nonconsolidated affiliates accounted for under the equity method.

The Company’s ownership in private equity fund partnerships varies between approximately 4% and 10%; the Company’s related investment balance included in Investments in Affiliates was $56.6 million and $68.9 million as of December 31, 2023 and 2022, respectively.

The summarized balance sheet data of the private equity fund investments consists of the following:

The summarized operating data of the private equity fund investments was as follows:

The summarized balance sheet data of the operating entity investments consists of the following:

The summarized operating data of the operating entity investments was as follows:

Cost Method Investments. The Company held investments without readily determinable fair values in a number of equity securities that are accounted for as cost method investments, which are recorded at cost, less impairment, and adjusted for observable price changes for identical or similar investments of the same issuer. The carrying value of these investments was$74.0 million and $66.7 million as of December 31, 2023 and 2022, respectively. During the years ended December 31, 2023, 2022 and 2021, the Company recorded gains of$3.1 million, $6.9 million and $11.8 million, respectively, to those equity securities based on observable transactions. For the years ended December 31, 2023 and 2022, the Company recorded impairment losses of$0.5 million and $1.3 million, respectively, to those securities.

5. ACCOUNTS RECEIVABLE, ACCOUNTS PAYABLE, VEHICLE FLOOR PLAN PAYABLE AND ACCRUED LIABILITIES

Accounts receivable consist of the following:

The changes in estimated credit losses were as follows:

Accounts payable, vehicle floor plan payable and accrued liabilities consist of the following:

Cash overdrafts of $0.5 million are included in accounts payable at December 31, 2023 and 2022.

The Company finances new, used and service loaner vehicle inventory through standardized floor plan facilities with Truist Bank and Toyota Motor Credit Corporation (Truist and Toyota floor plan facility) and Ford Motor Credit Company (Ford floor plan facility). On September 26, 2023, the Company entered into a credit agreement with Truist Bank (see Note 11) to, among other things, establish a new revolving floor plan credit facility with an aggregate capacity of $115.0 million. The Truist and Toyota floor plan facility bears interest at variable rates that are based on Secured Overnight Financing Rate (SOFR) plus 1.25% per annum. In connection with the establishment of the Truist and Toyota floor plan facility, the previous Truist floor plan facility, dated July 5, 2022, was repaid and terminated. At December 31, 2023, the floor plan facilities bore interest at variable rates that are based on SOFR and prime-based interest rates. The weighted average interest rate for the floor plan facilities was 6.2%,3.2% and 1.1% for the years ended December 31, 2023, 2022 and 2021, respectively. Changes in the vehicle floor plan payable are reported as cash flows from financing activities in the Consolidated Statements of Cash Flows.

The floor plan facilities are collateralized by vehicle inventory and other assets of the relevant dealership subsidiary, and contain a number of covenants, including, among others, covenants restricting the dealership subsidiary with respect to the creation of liens and changes in ownership, officers and key management personnel. The Company was in compliance with all of these restrictive covenants as of December 31, 2023.

The floor plan interest expense related to the vehicle floor plan arrangements is offset by amounts received from manufacturers in the form of floor plan assistance capitalized in inventory and recorded against cost of goods sold in the Consolidated Statements of Operations when the associated inventory is sold. For the years ended December 31, 2023, 2022 and 2021, the Company recognized a reduction in cost of goods sold of $6.7 million, $4.6 million and $2.7 million, respectively, related to manufacturer floor plan assistance.

Activity related to floor plan facilities associated with new vehicles is as follows:

6. INVENTORIES AND CONTRACTS IN PROGRESS

Inventories and contracts in progress consist of the following:

7. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following:

Depreciation expense was $86.1 million, $73.3 million, and $71.4 million in 2023, 2022 and 2021, respectively.

The Company recorded property, plant and equipment impairment charges of $0.3 million and $2.4 million in 2023 and 2021, respectively. The Company estimated the fair value of the property, plant and equipment using income and market approaches.

8. LEASES

Operating Leases. The components of operating lease expense were as follows:

The Company recorded impairment charges of $0.8 million and $3.9 million in 2023 and 2021, respectively. The Company estimated the fair value of the ROU assets using an income approach.

Supplemental information related to operating leases was as follows:

At December 31, 2023, maturities of operating lease liabilities were as follows:

As of December 31, 2023, the Company has entered into operating leases, including educational and other facilities, that have not yet commenced and have minimum lease payments of $23.3 million. These operating leases will commence in fiscal year 2024 with lease terms of 5 to 20 years.

Finance Leases. The components of financing lease expense were as follows:

Supplemental information related to finance leases was as follows:

At December 31, 2023, maturities of finance lease liabilities were as follows:

9. GOODWILL AND OTHER INTANGIBLE ASSETS

In the third quarter of 2023, due to continued sustained weakness in demand for certain Dekko power and data products primarily in the commercial office space market, the Company performed an interim review of the goodwill of the Dekko reporting unit. As a result of the impairment review, the Company recorded a$47.8 million goodwill impairment charge. Also in the third quarter of 2023, as a result of the substantial digital advertising revenue declines and continued significant operating losses at WGB, the Company performed an interim review of the goodwill of the WGB reporting unit. As a result of the impairment review, the Company recorded a$50.2 million goodwill impairment charge. The Company estimated the fair value of the reporting units by utilizing a discounted cash flow model. The carrying value of the reporting units exceeded their estimated fair values, resulting in goodwill impairment charges for the amount by which the carrying values exceeded their estimated fair values after taking into account the effect of deferred income taxes. Dekko is included in manufacturing and WGB is included in other businesses.

In the fourth quarter of 2022, as a result of the weakened current outlook for digital advertising and consumer demand for art and related goods following substantial declines in revenues and significant operating losses at the Leaf businesses, the Company recorded goodwill and amortized intangible asset impairment charges of $129.0 million at the Leaf Media (renamed WGB) and Leaf Marketplace (includes Society6 and Saatchi Art) reporting units. The Company estimated the fair value of the reporting units and amortized intangible assets by utilizing a discounted cash flow model. The carrying values of the reporting units and amortized intangible assets exceeded their estimated fair values, resulting in goodwill and intangible asset impairment charges for the amount by which the carrying values exceeded their estimated fair values after taking into account the effect of deferred income taxes. WGB, Society6 and Saatchi Art (collectively the Leaf businesses) are included in other businesses.

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

Amortization of intangible assets for the years ended December 31, 2023, 2022 and 2021, was $50.0 million, $58.9 million and $57.9 million, respectively. Amortization of intangible assets is estimated to be approximately $37 million in 2024, $29 million in 2025, $20 million in 2026, $6 million in 2027, $3 million in 2028 and $17 million thereafter.

The changes in the carrying amount of goodwill, by segment, were as follows:

The changes in carrying amount of goodwill at the Company’s education division were as follows:

Other intangible assets consist of the following:

10. INCOME TAXES

Income before income taxes consists of the following:

The provision for income taxes consists of the following:

The provision for income taxes differs from the amount of income tax determined by applying the U.S. Federal statutory rate of 21% to the income before taxes as a result of the following:

The Company’s effective tax rate for 2021 was favorably impacted by a $17.2 million deferred tax adjustment arising from a change in the estimated deferred state income tax rate attributable to the apportionment formula used in the calculation of deferred taxes related to the Company’s pension and other postretirement plans. This benefit is included in the overall state tax provision for 2021 of $2.2 million reflected above.

Deferred income taxes consist of the following:

The Company has $1,106.9 million of state income tax net operating loss carryforwards available to offset future state taxable income as of December 31, 2023. During 2021, the Company recorded $115.4 million of state income tax loss carryforwards as a result of the Leaf acquisition. State income tax loss carryforwards, if unutilized, will start to expire approximately as follows:

The Company has recorded $64.4 million in deferred state income tax assets, net of U.S. Federal income tax, with respect to these state income tax loss carryforwards as of December 31, 2023. The Company has established

$45.8 million in valuation allowances against these deferred state income tax assets, since the Company has determined that it is more likely than not that some of these state income tax losses may not be fully utilized in the future to reduce state taxable income.

The Company has $278.2 million of U.S. Federal income tax loss carryforwards obtained as a result of prior stock acquisitions as of December 31, 2023. During 2021, the Company recorded $262.5 million of U.S. Federal income tax loss carryforwards as a result of the Leaf acquisition. U.S. Federal income tax loss carryforwards are expected to be fully utilized as follows:

The Company has established $58.4 million in U.S. Federal deferred tax assets with respect to these U.S. Federal income tax loss carryforwards as of December 31, 2023.

For U.S. Federal income tax purposes, the Company has established U.S. Federal deferred tax assets with respect to $1.1 million of foreign tax credits available to be credited against future U.S. Federal income tax liabilities that will start to expire in 2024 if unutilized. The Company has recorded $1.1 million in valuation allowances against these deferred tax assets since the Company determined that it is more likely than not that these foreign tax credit carryforwards may not be utilized in the future to reduce U.S. Federal income taxes.

The Company has $112.7 million of non-U.S. income tax loss carryforwards as a result of operating losses and carryforwards that were obtained in part through prior stock acquisitions that are available to offset future non-U.S. taxable income and has recorded, with respect to these losses, $23.9 million in non-U.S. deferred income tax assets. The Company has established $12.3 million in valuation allowances against the deferred tax assets for the portion of non-U.S. tax losses that may not be utilized to reduce future non-U.S. taxable income. The $112.7 million of non-U.S. income tax loss carryforwards consist of $63.4 million in losses that may be carried forward indefinitely; $45.1 million of losses that, if unutilized, will expire in varying amounts through 2028; and $4.2 million of losses that, if unutilized, will start to expire after 2028.

The Company has $10.2 million of non-U.S. capital loss carryforwards that may be carried forward indefinitely and are available to offset future non-U.S. capital gains. The Company recorded a $3.1 million non-U.S. deferred income tax asset for these non-U.S. capital loss carryforwards and has established a full valuation allowance against this non-U.S. deferred tax asset since the Company has determined that it is more likely than not that the capital loss carryforwards may not be utilized to reduce taxable income in the future.

Deferred tax valuation allowances and changes in deferred tax valuation allowances were as follows:

The Company has established $49.6 million in valuation allowances against deferred state tax assets recognized, net of U.S. Federal tax. As stated above, approximately $45.8 million of the valuation allowances, net of U.S. Federal income tax, relate to state income tax loss carryforwards. In most instances, the Company has established valuation allowances against deferred state income tax assets without considering potentially offsetting deferred tax liabilities established with respect to prepaid pension cost and goodwill. Prepaid pension cost and goodwill have not been considered a source of future taxable income for realizing those deferred state tax assets recognized because these temporary differences are not likely to reverse in the foreseeable future. However, certain deferred state tax assets have an indefinite life. As a result, the Company has considered deferred tax liabilities for prepaid pension cost and goodwill as a source of future taxable income for realizing those deferred state tax assets with indefinite lives. The valuation allowances established against deferred state income tax assets may increase or decrease within the next 12 months, based on operating results or the market value of investment holdings. The Company will monitor 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 has established $15.5 million in valuation allowances against non-U.S. deferred tax assets, and, as stated above, $12.3 million of the non-U.S. valuation allowances relate to non-U.S. income tax loss carryforwards and $3.1 million relate to non-U.S. capital loss carryforwards. Valuation allowances established against non-U.S. deferred tax assets are recorded at the education division and other businesses. These non-U.S. valuation allowances may increase or decrease within the next 12 months, based on operating results. As a result, the Company is unable to estimate the potential tax impact, given the uncertain operating environment. The Company will monitor future education division and other businesses’ operating results and projected future operating results on a quarterly basis to determine whether the valuation allowances provided against non-U.S. deferred tax assets should be increased or decreased as future circumstances warrant.

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. Approximately $2.0 million of deferred tax liabilities remain recorded on the books at December 31, 2023, with respect to future non-U.S. withholding taxes the Company estimated may be imposed on future cash distributions.

U.S. Federal and state tax liabilities may be recorded if the investment in non-U.S. subsidiaries becomes held for sale instead of being held indefinitely, but the calculation of the tax due is not practicable.

The 2020 U.S. Federal tax return and subsequent years remain open to IRS examination. The Company files income tax returns with the U.S. Federal government and in various state, local and non-U.S. governmental jurisdictions, with the consolidated U.S. Federal tax return filing considered the only major tax jurisdiction.

The Company endeavors to comply with tax laws and regulations where it does business, but cannot guarantee that, if challenged, the Company’s interpretation of all relevant tax laws and regulations will prevail and that all tax benefits recorded in the financial statements will ultimately be recognized in full.

The following summarizes the Company’s unrecognized tax benefits, excluding interest and penalties, for the respective periods:

The unrecognized tax benefits relate to federal and state research and development tax credits applicable to the 2020 to 2023 tax periods, as well as state income tax filing positions applicable to the 2012 to 2018 and 2020 tax periods. In making these determinations, the Company presumes that taxing authorities pursuing examinations of the Company’s compliance with tax law filing requirements will have full knowledge of all relevant information, and, if necessary, the Company will pursue resolution of disputed tax positions by appeals or litigation. Although the Company cannot predict the timing of resolution with tax authorities, the Company estimates that some of the unrecognized tax benefits may change in the next 12 months due to settlement with the tax authorities. The Company expects that a $1.3 million federal tax benefit and a $2.0 million state tax benefit, net of $0.4 million federal tax expense, will reduce the effective tax rate in the future if the unrecognized tax benefits are recognized.

The Company classifies interest and penalties related to uncertain tax positions as a component of interest and other expenses, respectively. As of December 31, 2023, the Company has accrued $0.4 million of interest related to the unrecognized tax benefits. The Company hasnot accrued any penalties related to the unrecognized tax benefits.

In December 2021, the Organization for Economic Co-operation and Development (OECD) issued a set of rules known as “Pillar Two” with the intent to ensure that global companies pay a minimum corporate income tax of 15% in jurisdictions in which the global companies operate. Many non-U.S. countries (including the U.K. and European Union member countries) enacted legislation to adopt certain aspects of Pillar Two effective January 1, 2024, and additional elements are expected to be adopted in future years. While the U.S. has not adopted Pillar Two, rules implemented by participating countries will apply to the Company’s worldwide operations in 2024. The Company does not have material operations in jurisdictions with tax rates lower than 15% and does not expect Pillar Two to have a material impact on the Company’s consolidated financial statements. The Company will continue to assess the relevant tax legislation and guidance to determine its impact.

11. DEBT

The Company’s borrowings consist of the following:

(1)The carrying value is net of$1.7 million and $2.5 million of unamortized debt issuance costs as of December 31, 2023 and 2022, respectively.

(2)The carrying value is net of$0.6 million of unamortized debt issuance costs as of December 31, 2023.

(3)The carrying value is net of$0.1 million of unamortized debt issuance costs as of December 31, 2023.

(4)The carrying value is net of$0.8 million of unamortized debt issuance costs as of December 31, 2023.

(5)The carrying value is net of $0.1 million of unamortized debt issuance costs as of December 31, 2022.

(6)The carrying value is net of $0.1 million of unamortized debt issuance costs as of December 31, 2022.

The Company’s $400 million senior unsecured fixed-rate notes (the Notes), due June 1, 2026, are guaranteed, jointly and severally, on a senior unsecured basis, by certain of the Company’s existing and future domestic subsidiaries, as described in the terms of the indenture. The Notes have a coupon rate of 5.75% per annum, payable semi-annually on June 1 and December 1. The Company may redeem the Notes in whole or in part at any time at the respective redemption prices described in the indenture. At December 31, 2023 and 2022, the fair value of the Notes, based on quoted market prices (Level 2 fair value assessment), totaled$400.4 million and $395.1 million, respectively.

On May 3, 2022, the Company amended the revolving credit facility to, among other things, (i) extend the maturity of the facility to May 30, 2027, (ii) eliminate borrowings under separate U.S. dollar and multicurrency tranches, (iii) update certain interest rate benchmarks including replacing USD London Interbank Offered Rate (LIBOR) with SOFR for borrowings denominated in U.S. dollars, (iv) incorporate a sub-facility for the issuance of letters of credit, and (v) allow for applicable margin for borrowings to be determined and adjusted quarterly based on the Company’s Total Net Leverage Ratio. The outstanding balance on the Company’s $300 million unsecured revolving credit facility was $97.9 million as of December 31, 2023, consisting of U.S. dollar borrowings of$34 million with interest payable at SOFR plus 1.375% or prime rate plus 0.375%, and British Pound (GBP) borrowings of £50 million with interest payable at Daily Sterling Overnight Index Average (SONIA) plus 1.375%.

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

On September 26, 2023, the Company’s automotive subsidiary entered into a credit agreement with Truist Bank, which includes (i) a $75.2 million real estate term loan, (ii) a $65.0 million capital term loan, (iii) a $50.0 million delayed draw term loan, and (iv) establishment of a revolving floor plan credit facility (see Note 5). The real estate term loan is payable in monthly installments of $0.3 million and bears interest at variable rates based on SOFR plus 1.75% per annum, and the capital term loan is payable in monthly installments of $0.5 million and bears interest at variable rates based on SOFR plus 2.00% per annum. The monthly installment payments on the real estate and capital term loans commenced on November 1, 2023, with final payments of the outstanding principal balances due on September 26, 2028. Subject to terms and conditions set forth in the credit agreement, the automotive subsidiary may also request borrowings of delayed draw term loans for which the proceeds may be used to (i) finance the acquisition of automobile dealerships (delayed draw capital loan) and (ii) finance the acquisition of real estate (delayed draw real estate loan). The delayed draw term loan bears interest at variable rates based on SOFR plus an applicable margin based on the type of delayed draw term loan requested. The delayed draw term loan availability period terminates on September 26, 2025. The automotive subsidiary didnot borrow against the delayed draw term loan as of December 31, 2023.

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

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

The fair value of the Company’s other debt, which is based on Level 2 inputs, approximates its carrying value as of December 31, 2023 and 2022. The Company is in compliance with all financial covenants of the revolving credit facility and term loans as of December 31, 2023.

During 2023 and 2022, the Company had average borrowings outstanding of approximately$745.0 million and $689.9 million, respectively, at average annual interest rates of approximately 6.1% and 4.8%, respectively. The Company incurred net interest expense of$56.2 million, $51.2 million and $30.5 million during 2023, 2022 and 2021, respectively.

For the years ended December 31, 2023, 2022 and 2021, the Company recorded interest expense of$10.1 million, $16.5 million and $4.1 million, respectively, to adjust the fair value of the mandatorily redeemable noncontrolling interest. The fair value of the mandatorily redeemable noncontrolling interest was based on the fair value of the underlying subsidiaries owned by GHC One and GHC Two, after taking into account any debt and other noncontrolling interests of its subsidiary investments. The fair value of the owned subsidiaries is determined by reference to either a discounted cash flow or EBITDA multiple, which approximates fair value (Level 3 fair value assessment).

12. FAIR VALUE MEASUREMENTS

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

The following table provides a reconciliation of changes in the Company’s financial liabilities measured at fair value on a recurring basis, using Level 3 inputs:

For the years ended December 31, 2023, 2022 and 2021, the Company recorded goodwill and other long-lived asset impairment charges of$99.1 million, $129.0 million and $32.9 million, respectively (see Note 19). The remeasurement ofgoodwill and other long-lived assets is classified as a Level 3 fair value assessment due to the significance of unobservable inputs developed in the determination of the fair value. The Company used a discounted cash flow model to determine the estimated fair value of the reporting units, indefinite-lived intangible assets, and other long-lived assets. Where appropriate, a market value approach was also utilized to supplement the discounted cash flow model. The Company made estimates and assumptions regarding future cash flows, royalty rates, discount rates, market values, and long-term growth rates.

For the years ended December 31, 2023, 2022 and 2021, the Company recorded gains of$3.1 million, $6.9 million and $11.8 million, respectively, to equity securities that are accounted for as cost method investments based on observable transactions for identical or similar investments of the same issuer. For the years ended December 31, 2023 and 2022, the Company recorded impairment losses of $0.5 million and $1.3 million, respectively, to equity securities that are accounted for as cost method investments.

For the year ended December 31, 2021, the Company recorded impairment charges of $6.6 million onone of its investments in affiliates (see Note 4).

13. REVENUE FROM CONTRACTS WITH CUSTOMERS

The Company generated 79%,81% and 78% of its revenue from U.S. domestic sales in 2023, 2022 and 2021, respectively. The remaining 21%,19%, and 22% of revenue was generated from non-U.S. sales.

In 2023, 2022 and 2021, the Company recognized 54%,58%, and 67%, respectively, of its revenue over time as control of the services and goods transferred to the customer. The remaining 46%,42% and 33%, respectively, of revenue was recognized at a point in time, when the customer obtained control of the promised goods.

The determination of the method by which the Company measures its progress towards the satisfaction of its performance obligations requires judgment and is described in the Summary of Significant Accounting Policies (Note 2).

Contract Assets. As of December 31, 2023, the Company recognized a contract asset of $39.8 million related to a contract at a Kaplan International business, which is included in Deferred Charges and Other Assets. The Company expects to recognize an additional $311.6 million related to the remaining performance obligation in the contract over the nextsix years. As of December 31, 2022, the contract asset was $26.3 million.

Deferred Revenue. The Company records deferred revenue when cash payments are received or due in advance of the Company’s performance which includes some payments that are refundable due to the contractual right of the customer to cancel the agreement. As of December 31, 2023 and 2022,20% and 18% of the Company’s deferred revenue consisted of prepaid amounts which are refundable. The following table presents the change in the Company’s deferred revenue balance during the year ended December 31, 2023:

In April 2020, GHG received $31.5 million under the expanded Medicare Accelerated and Advanced Payment Program modified by the CARES Act as a result of COVID-19. The Department of Health and Human Services began to recoup this advance 365 days after the payment was issued. The advance had been recouped in full as of December 31, 2022. For the years ended December 31, 2022 and 2021, GHG recognized $12.6 million and $18.9 million of the balance in revenue for claims submitted for eligible services, respectively.

The majority of the change in the deferred revenue balance is due to increased enrollment in the Kaplan International division. During the year ended December 31, 2023, the Company recognized $302.2 million from the Company’s deferred revenue balance as of December 31, 2022, including $54.3 million of prepaid amounts which were refundable at the prior year-end.

Revenue allocated to remaining performance obligations represents deferred revenue amounts that will be recognized as revenue in future periods. As of December 31, 2023, the deferred revenue balance related to certain medical and nursing qualifications with an original contract length greater than twelve months at Kaplan Supplemental Education was$7.1 million. Kaplan Supplemental Education expects to recognize 73% of this revenue over the next twelve months and the remainder thereafter.

Costs to Obtain a Contract. The following table presents changes in the Company’s costs to obtain a contract asset:

The majority of other activity was related to currency translation adjustments in 2023, 2022, and 2021.

14. CAPITAL STOCK, STOCK AWARDS AND STOCK OPTIONS

Capital Stock. Each share of Class A common stock and Class B common stock participates equally in dividends. The Class B stock has limited voting rights and as a class has the right to elect 30% of the Board of Directors; the Class A stock has unlimited voting rights, including the right to elect a majority of the Board of Directors.

During 2023, 2022, and 2021 the Company purchased a total of 325,134,121,761, and 93,969 shares, respectively, of its Class B common stock at a cost of approximately $195.0 million, $71.4 million, and $55.7 million, respectively, including commissions and excise taxes. On May 4, 2023, the Board of Directors authorized the Company to purchase up to 500,000 shares of its Class B Common Stock. This authorization includes shares that remained under the previous authorization. The Company did not announce a ceiling price or time limit for the purchases. At December 31, 2023, the Company had remaining authorization from the Board of Directors to purchase up to 236,403 shares of Class B common stock.

Stock Awards. In 2012, the Company adopted an incentive compensation plan (the 2012 Plan), which, among other provisions, authorizes the awarding of Class B common stock to key employees in the form of stock awards, stock options and other awards involving the issuance of shares. Stock awards made under the 2012 Plan are primarily subject to the general restriction that stock awarded to a participant will be forfeited and revert to Company ownership if the participant’s employment terminates before the end of a specified period of service to the Company. At December 31, 2023, there were 191,474 shares reserved for issuance under the 2012 Plan, which were all subject to stock awards and stock options outstanding.

In 2022, the Company adopted a new incentive compensation plan (the 2022 Plan), which, among other provisions, authorizes the awarding of Class B common stock to key employees and non-employee Directors in the form of stock awards, stock options and other awards involving the issuance of shares. All stock awards, stock options and other awards involving the issuance of shares issued subsequent to the adoption of this plan are covered under this new incentive compensation plan. Stock awards made under the 2022 Plan are primarily subject to the general restriction that stock awarded to a participant will be forfeited and revert to Company ownership if the participant’s employment terminates before the end of a specified period of service to the Company. The number of Class B common shares authorized for issuance under the 2022 Plan is 500,000 shares. At December 31, 2023, there were 498,924 shares reserved for issuance under the 2022 Plan. Of this number,14,220 shares were subject to stock awards and 484,704 shares were available for future awards.

Activity related to stock awards under these incentive compensation plans for the year ended December 31, 2023 was as follows:

For the share awards outstanding at December 31, 2023, the aforementioned restriction is expected to lapse in 2025 for 13,429 shares and 2027 for 16,220 shares. Also, early in 2024, the Company issued stock awards of 1,006 shares. Stock-based compensation costs resulting from Company stock awards were $3.9 million, $3.4 million and $3.9 million in 2023, 2022 and 2021, respectively.

As of December 31, 2023, there was $8.9 million of total unrecognized compensation expense related to these awards. That cost is expected to be recognized on a straight-line basis over a weighted average period of 2.1 years.

Stock Options. Stock options granted under the incentive compensation plans cannot be less than the fair value on the grant date, generally vest oversix years and have a maximum term often years.

Activity related to options outstanding for the year ended December 31, 2023 was as follows:

Of the shares covered by options outstanding at the end of 2023,136,415 are now exercisable;12,876 are expected to become exercisable in 2024;12,877 are expected to become exercisable in 2025; and 12,877 are expected to become exercisable in 2026. For 2023, 2022 and 2021, the Company recorded expense of $1.2 million, $1.2 million and $1.7 million, respectively, related to stock options. Information related to stock options outstanding and exercisable at December 31, 2023, is as follows:

At December 31, 2023, the intrinsic value for all options outstanding, exercisable and unvested was $19.2 million, $8.7 million and $10.4 million, respectively. The intrinsic value of a stock option is the amount by which the market value of the underlying stock exceeds the exercise price of the option. The market value of the Company’s stock was $696.52 at December 31, 2023. At December 31, 2023, there were 38,630 unvested options related to this plan with an average exercise price of $426.86 and a weighted average remaining contractual term of 6.7 years. At December 31, 2022, there were 51,841 unvested options with an average exercise price of $429.57 and a weighted average remaining contractual term of 7.7 years.

As of December 31, 2023, total unrecognized stock-based compensation expense related to stock options was $3.2 million, which is expected to be recognized on a straight-line basis over a weighted average period of approximately 2.7 years. There were 3,060 options exercised during 2023. The total intrinsic value of options exercised during

2023 was $0.5 million; a tax benefit from these option exercises of $0.1 million was realized. There were 5,084 options exercised during 2022. The total intrinsic value of options exercised during 2022 was $1.2 million; a tax benefit from these option exercises of $0.3 million was realized. There wereno options exercised during 2021.

No options were granted during 2023, 2022 or 2021.

Other Awards. In 2022, the Company granted a stock award to an executive officer that is subject to price-based vesting conditions. The stock award provides the executive officer the right to receive 1,000 shares of the Company’s Class B common stock each time the Company’s closing share price exceeds a certain share price target for a 90 consecutive day period; the award period expires on December 31, 2027. The grant date fair value of the stock award totaled $3.5 million, which was estimated using a Monte Carlo simulation. The grant date fair value is recognized over the derived service period of each tranche. No shares related to this award vested in 2023 or 2022. The Company recognized $1.1 million and $1.3 million in stock-based compensation expense related to this award in 2023 and 2022, respectively.

For the year ended December 31, 2023, the Company recognized expense of $0.4 million related to the issuance and vesting of 731 shares to non-employee Directors under the 2022 Plan. For the year ended December 31, 2022, the Company recognized expense of $0.2 million for 345 shares issued and vested under the same plan.

The Company also maintains a stock option plan at Kaplan. Under the provisions of this plan, options are issued with an exercise price equal to the estimated fair value of Kaplan’s common stock, and options vest ratably over the number of years specified (generally four tofive years) at the time of the grant. Upon exercise, an option holder may receive Kaplan shares or cash equal to the difference between the exercise price and the then fair value.

At December 31, 2023, a Kaplan senior manager held 7,206 Kaplan restricted shares. The fair value of Kaplan’s common stock is determined by the Company’s compensation committee of the Board of Directors, and in January 2024, the committee set the fair value price at $1,700 per share. No options were awarded during 2023, 2022, or 2021; no options were exercised during 2023, 2022 or 2021; andno options were outstanding at December 31, 2023.

Kaplan recorded stock compensation expense of $1.0 million, $1.0 million and $1.3 million in 2023, 2022 and 2021, respectively. At December 31, 2023, the Company’s accrual balance related to the Kaplan restricted shares totaled $12.3 million. There wereno payouts in 2023, 2022 or 2021.

Earnings Per Share. The Company’s unvested restricted stock awards contain nonforfeitable rights to dividends and, therefore, are considered participating securities for purposes of computing earnings per share pursuant to the two-class method. The diluted earnings per share computed under the two-class method is lower than the diluted earnings per share computed under the treasury stock method, resulting in the presentation of the lower amount in diluted earnings per share. The computation of earnings per share under the two-class method excludes the income attributable to the unvested restricted stock awards from the numerator and excludes the dilutive impact of those underlying shares from the denominator.

The following reflects the Company’s net income and share data used in the basic and diluted earnings per share computations using the two-class method:

Earnings per share amounts may not recalculate due to rounding.

Diluted earnings per share excludes the following weighted average potential common shares, as the effect would be antidilutive, as computed under the treasury stock method:

The 2023, 2022 and 2021 diluted earnings per share amounts exclude the effects of 105,000,105,000 and 104,000 stock options and contingently issuable shares outstanding, respectively, as their inclusion would have been antidilutive due to a market condition.

In 2023, 2022 and 2021, the Company declared regular dividends totaling $6.60, $6.32 and $6.04 per share, respectively.

15. PENSIONS AND OTHER POSTRETIREMENT PLANS

The Company maintains various pension and incentive savings plans and contributed to multiemployer plans on behalf of certain union-represented employee groups. Most of the Company’s employees are covered by these plans. The Company also provides healthcare and life insurance benefits to certain retired employees. These employees become eligible for benefits after meeting age and service requirements.

The Company uses a measurement date of December 31 for its pension and other postretirement benefit plans.

Defined Benefit Plans. The Company’s defined benefit pension plans consist of various pension plans and a Supplemental Executive Retirement Plan (SERP) offered to certain executives of the Company.

In the first quarter of 2023, the Company recorded $4.1 million in expenses related to Separation Incentive Programs (SIPs) for certain Leaf and Code3 employees, which was funded from the assets of the Company’s pension plans. In the second quarter of 2023, the Company recorded $5.5 million in expenses related to SIPs for certain Kaplan, GMG, Leaf, Code3 and Pinna employees, which was funded from the assets of the Company’s pension plans. In the fourth quarter of 2023, the Company recorded $0.2 million in expenses related to a SIP for certain GMG employees, which was funded from the assets of the Company’s pension plans.

In January 2022, a pension credit retention program was implemented by the Company for certain Graham Healthcare Group employees; the program offers a pension credit up to $50,000 per employee, cliff vested after three years of continuous employment for certain existing employees and new employees. The Company recorded $13.5 million and $10.5 million in pension service cost expense in 2023 and 2022 related to this program.

In the fourth quarter of 2022, the Company recorded $3.6 million in expenses related to a SIP for certain Kaplan employees, which was funded from the assets of the Company’s pension plans.

In the second quarter of 2021, the Company recorded $1.1 million in expenses related to a SIP for certain Dekko employees, which was funded from the assets of the Company’s pension plans.

The following table sets forth obligation, asset and funding information for the Company’s defined benefit pension plans:

The changes in the Company’s benefit obligations for the pension plans and SERP in 2023 were primarily due to the benefits paid during the year offset by the recognition of an actuarial loss resulting from a decrease to the discount rate used to measure the benefit obligation and special termination benefits provided to employees.

The accumulated benefit obligation for the Company’s pension plans at December 31, 2023 and 2022, was $880.3 million and $843.6 million, respectively. The accumulated benefit obligation for the Company’s SERP at December 31, 2023 and 2022, was $89.4 million and $88.0 million, respectively. The amounts recognized in the Company’s Consolidated Balance Sheets for its defined benefit pension plans are as follows:

Key assumptions utilized for determining the benefit obligation are as follows:

The Company madeno contributions to its pension plans in 2023 and 2022, and the Company doesnot expect to make any contributions in 2024. The SERP is unfunded, therefore, the Company made actual benefit payments of $6.3 million and $5.9 million to beneficiaries for the years ended December 31, 2023 and 2022, respectively.

At December 31, 2023, future estimated benefit payments, excluding charges for early retirement programs, are as follows:

The total (benefit) cost arising from the Company’s defined benefit pension plans consists of the following components:

The costs for the Company’s defined benefit pension plans are actuarially determined. Below are the key assumptions utilized to determine periodic cost:

Accumulated other comprehensive income (AOCI) includes the following components of unrecognized net periodic cost for the defined benefit plans:

Defined Benefit Plan Assets. The Company’s defined benefit pension obligations are funded by a portfolio made up of private investment funds, a U.S. stock index fund, and a relatively small number of stocks and high-quality fixed-income securities that are held by a third-party trustee. The assets of the Company’s pension plans were allocated as follows:

The Company manages approximately 40% of the pension assets internally, of which the majority is invested in private investment funds with the remaining investments in Berkshire Hathaway and Markel stock, a U.S. stock index fund, and short-term fixed-income securities. The remaining 60% of plan assets are managed bytwo investment companies. The goal of the investment managers is to produce moderate long-term growth in the value of these assets, while protecting them against large decreases in value. Both investment managers may invest in a combination of equity and fixed-income securities and cash. The managers are not permitted to invest in securities of the Company or in alternative investments. One investment manager cannot invest more than 15% of the assets at the time of purchase in the stock of Alphabet and Berkshire Hathaway, and no more than 35% of the assets it manages in specified international exchanges at the time the investment is made. The other investment manager cannot invest more than 20% of the assets at the time of purchase in the stock of Berkshire Hathaway, and no more than 15% of the assets it manages in specified international exchanges at the time the investment is made, and no less than 10% of the assets could be invested in fixed-income securities. Excluding the exceptions noted above, the investment managers cannot invest more than 10% of the assets in the securities of any other single issuer, except for obligations of the U.S. Government, without receiving prior approval from the plan administrator.

In determining the expected rate of return on plan assets, the Company considers the relative weighting of plan assets, the historical performance of total plan assets and individual asset classes and economic and other indicators of future performance. In addition, the Company may consult with and consider the input of financial and other professionals in developing appropriate return benchmarks.

The Company evaluated its defined benefit pension plan asset portfolio for the existence of significant concentrations (defined as greater than 10% of plan assets) of credit risk as of December 31, 2023. Types of concentrations that were evaluated include, but are not limited to, investment concentrations in a single entity, type of industry, foreign country and individual fund. At December 31, 2023, the pension plan held investments inone common stock andone private investment fund that exceeded 10% of total plan assets, valued at $1,011.1 million, or approximately 34% of total plan assets. At December 31, 2022, the pension plan held investments inone common stock andone private investment fund that exceeded 10% of total plan assets, valued at $842.6 million, or approximately 33% of total plan assets. Assets also included $82.4 million of Markel shares at December 31, 2023.

The Company’s pension plan assets measured at fair value on a recurring basis were as follows:

The following table sets forth a summary of the Plan’s investments with a reported NAV:

Other Postretirement Plans. In 2023, the Company purchased a contract from an insurance company to settle its outstanding retiree life insurance obligation for $1.7 million. As a result, the Company recorded a settlement gain of $1.1 million.

The following table sets forth obligation, asset and funding information for the Company’s other postretirement plans:

The change in the benefit obligation for the Company’s other postretirement plans in 2023 was primarily due to the settlement of the retiree life insurance obligation.

The amounts recognized in the Company’s Consolidated Balance Sheets for its other postretirement plans are as follows:

The discount rates utilized for determining the benefit obligation at December 31, 2023 and 2022, for the postretirement plans were 4.53% and 4.76%, respectively. The assumed healthcare cost trend rate used in measuring the postretirement benefit obligation at December 31, 2023, was 7.50% for pre-age 65, decreasing to 4.5% in the year 2032 and thereafter. The assumed healthcare cost trend rate used in measuring the postretirement benefit obligation at December 31, 2023, was 8.04% for post-age 65, decreasing to 4.5% in the year 2032 and thereafter. The assumed healthcare cost trend rate used in measuring the postretirement benefit obligation at December 31, 2023, was 11.25% for Medicare Advantage, decreasing to 4.5% in the year 2032 and thereafter.

The Company’s postretirement benefit plans are unfunded, therefore, the Company made actual benefit payments of $0.2 million to beneficiaries for each of the years ended December 31, 2023 and 2022.

At December 31, 2023, future estimated benefit payments are as follows:

The total benefit arising from the Company’s other postretirement plans consists of the following components:

The costs for the Company’s postretirement plans are actuarially determined. The discount rate utilized to determine the periodic cost for the years ended December 31, 2023, 2022 and 2021 was 4.76%,2.23% and 1.78%. AOCI included the following components of unrecognized net periodic benefit for the postretirement plans:

Multiemployer Pension Plans. In 2023, 2022 and 2021, the Company contributed toone multiemployer defined benefit pension plan under the terms of a collective-bargaining agreement that covered certain union-represented employees. The Company’s total contributions to the multiemployer pension plan amounted to $0.1 million in each year for 2023, 2022 and 2021.

Savings Plans. The Company recorded expense associated with retirement benefits provided under incentive savings plans (primarily 401(k) plans) of approximately $13.0 million in 2023, $11.6 million in 2022 and $10.9 million in 2021.

16. OTHER NON-OPERATING INCOME

A summary of non-operating income is as follows:

The gain on cost method investments result from observable price changes in the fair value of the underlying equity securities accounted for under the cost method (see Notes 4 and 12).

For the years ended December 31, 2023, 2022 and 2021, the Company recorded contingent consideration gains of $5.6 million, $4.3 million and $3.9 million, respectively, related to the disposition of Kaplan University (KU) in 2018.

In the second quarter of 2023, the Company recorded a $10.0 million gain related to the Pinna transaction (see Notes 3 and 4). The Company used a market approach to determine the fair value of the noncontrolling financial interest received in Realm in exchange for the Pinna business.

In the fourth quarter of 2022, the Company recorded an $18.4 million gain related to the CyberVista transaction (see Notes 3 and 4). The Company used a market approach to determine the fair value of the noncontrolling financial interest retained in CyberVista through its interest in N2K Networks.

17. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The other comprehensive income (loss) consists of the following components:

The accumulated balances related to each component of other comprehensive income (loss) are as follows:

The amounts and line items of reclassifications out of Accumulated Other Comprehensive Income (Loss) are as follows:

(1)These accumulated other comprehensive income components are included in the computation of net periodic pension and postretirement plan cost (see Note 15) and are included in non-operating pension and postretirement benefit income in the Company’s Consolidated Statements of Operations.

18. CONTINGENCIES AND OTHER COMMITMENTS

Litigation, Legal and Other Matters. The Company and its subsidiaries are subject to complaints and administrative proceedings and are defendants in various civil lawsuits that have arisen in the ordinary course of their businesses, including contract disputes; actions alleging negligence, libel, defamation and invasion of privacy; trademark, copyright and patent infringement; real estate lease and sublease disputes; violations of employment laws and applicable wage and hour laws; and statutory or common law claims involving current and former students and employees. Although the outcomes of the legal claims and proceedings against the Company cannot be predicted with certainty, based on currently available information, management believes that there areno existing claims or proceedings that are likely to have a material effect on the Company’s business, financial condition, results of operations or cash flows. However, based on currently available information, management believes it is reasonably possible that future losses from existing and threatened legal, regulatory and other proceedings in excess of the amounts recorded could reach approximately $10 million.

In May 2021, Kaplan received notice from the ED that it would be conducting a fact-finding process pursuant to the borrower defense to repayment (BDTR) regulations to determine the validity of BDTR claims and a request for documents related to several of Kaplan’s previously owned schools. In 2021, Kaplan received borrower defense applications from the ED seeking discharge of approximately $35 million in loans, excluding interest, from former Kaplan University students. It is not clear to what extent the ED will exclude claims based on the underlying statutes of limitations, evidence provided by Kaplan, prior settlements with these students relieving their debt outside of the BDTR process, or any prior investigation related to schools attended by the student applicants. The ED’s process for adjudicating these claims is subject to the borrower defense regulations including those finalized in 2022 and effective July 1, 2023. Compared to the previous rule, the new rule in part, expands actions that can give rise to claims for discharge; provides that the borrower’s claim will be presumed true if the institution does not provide any responsive evidence; provides an easier process for group claims; and relies on current program review penalty hearing processes for discharge recoupment. Under the rule, the recoupment process applies only to loans first disbursed after July 1, 2023; however, the discharge process and standards apply to any pending application regardless of the loan date.

Kaplan believes it has substantive as well as procedural defenses to the borrower defense claims that would bar any student discharge or school liability including that the claims are barred by the applicable statute of limitations, are unproven, incomplete and fail to meet regulatory filing requirements. Kaplan expects to vigorously defend any attempt by the ED to hold Kaplan liable for any ultimate student discharges. Kaplan responded to the initial set of claims in 2021 with documentary and narrative evidence to refute the allegations, demonstrate their lack of merit, and support the denial of all such claims by the ED. Kaplan intends to similarly respond to any new claims that apply to Kaplan University or prior Kaplan-owned schools. If the claims are successful, the ED may seek reimbursement for the amount discharged from Kaplan. If the ED initiates a reimbursement action against Kaplan following approval of former students’ BDTR applications, Kaplan may be subject to significant liability.

As part of the Sweet v. Cardona settlement described below, the ED agreed to review any borrower defense applications submitted between June 23, 2022, and November 15, 2022 on an expedited basis. In January 2024, Kaplan was informed that the ED received applications during this time period regarding former Kaplan University and Purdue Global students and Kaplan has begun to receive them. Unknown at this time is the total discharge amount sought or how much of that amount would apply to Kaplan University students. The Sweet v. Cardona settlement requires the ED to adjudicate applications received during the designated time period pursuant to the requirements of the 2016 Borrower Defense Regulation. To the extent these applications apply to Kaplan University, Kaplan anticipates that it will have defenses similar to those described above. As noted, if the claims are successful, the ED may seek reimbursement for the amount discharged from Kaplan. If the ED initiates a reimbursement action against Kaplan following approval of additional former students’ borrower defense to repayment applications, Kaplan may be subject to significant liability.

In November 2022 the Northern District of California approved the settlement agreement in the lawsuit Sweet v. Cardona. The Plaintiffs in that lawsuit claimed that the ED failed to properly consider and decide pending BDTR claims. As part of the settlement, the ED agreed to discharge loans of borrowers who attended 150 specific schools, including all schools formerly owned by Kaplan, and who had BDTR claims pending as of the June 22, 2022 settlement execution date. This discharge will likely cover each of the first set of applications the ED sent to Kaplan and to which Kaplan previously responded. The ED and the Court made clear that these discharges as part of a settlement are not determinations that the pending BDTR claims are valid and the fact of the settlement discharge cannot be used as evidence of any determination of wrongdoing by the institutions. However, despite the fact that the loans are discharged per the settlement, the ED may still attempt to separately adjudicate the associated BDTR claims and follow the regulatory process for seeking recoupment from the institutions for such claims. As noted above, this settlement likely also applies to the resolution, future adjudication, and possible discharge of the newly noticed claims. As also noted, the ED could attempt to recoup from Kaplan some or all of any discharged amount for the newly noticed claims.

In August 2018, Purdue University Global received an updated Provisional Program Participation Agreement (PPPA) from the ED which is necessary for continued participation in the federal Title IV programs after the change in ownership from Kaplan to Purdue. The PPPA expired on June 30, 2021 but was extended to June 30, 2022. In August 2022, Purdue University Global received an extended PPPA that is effective through June 30, 2024. Under the extended PPPA, among other restrictions, Purdue University Global must also report information related to known governmental investigations and student complaints on a quarterly basis to the ED. The provisional certification ends upon the ED’s notification to the institution of the ED’s decision to grant or deny a six-year certification to participate in the Title IV, Higher Education Act programs.

Other Commitments. The Company’s broadcast subsidiaries are parties to certain agreements that commit them to purchase programming to be produced in future years. At December 31, 2023, such commitments amounted to approximately $12.6 million. If such programs are not produced, the Company’s commitment would expire without obligation.

19. BUSINESS SEGMENTS

Basis of Presentation. The Company’s organizational structure is based on a number of factors that management uses to evaluate, view and run its business operations, which include, but are not limited to, customers, the nature of products and services and use of resources. The business segments disclosed in the Consolidated Financial Statements are based on this organizational structure and information reviewed by the Company’s management to evaluate the business segment results.

In the second quarter of 2023, Kaplan modified its segment reporting for Kaplan India, a shared services center that supports Higher Education. Kaplan India was previously included in Kaplan corporate and other. Certain amounts in previously issued financial statements have been reclassified to conform to the current presentation.

The Company hasseven reportable segments: Kaplan International, Kaplan Higher Education, Kaplan Supplemental Education, Television Broadcasting, Manufacturing, Healthcare and Automotive.

The Company evaluates segment performance based on operating income before amortization of intangible assets and impairment of goodwill and other long-lived assets. The accounting policies at the segments are the same as described in Note 2. In computing operating income before amortization by segment, the effects of amortization of intangible assets, impairment of goodwill and other long-lived assets, equity in earnings (losses) of affiliates, interest income, interest expense, non-operating pension and postretirement benefit income, other non-operating income and expense items and income taxes are excluded. Intersegment sales are not material.

Identifiable assets by segment are those assets used in the Company’s operations in each business segment. The investments in marketable equity securities and affiliates, and prepaid pension cost are not included in identifiable assets by segment. Investments in marketable equity securities are discussed in Note 4.

Education. Education products and services are provided by Kaplan, Inc. Kaplan International includes professional training and postsecondary education businesses largely outside the U.S., as well as English-language programs. KHE includes the results as a service provider to higher education institutions. Supplemental Education includes Kaplan’s standardized test preparation, domestic professional and other continuing education businesses.

As of December 31, 2023, Kaplan had a total outstanding accounts receivable balance of $98.2 million from Purdue Global related to amounts due for reimbursements for services, fees earned and a deferred fee. Included in this total, Kaplan has a $19.6 million long-term receivable balance due from Purdue Global at December 31, 2023, related to the advance of $20.0 million during the initial KU Transaction.

Television Broadcasting. Television broadcasting operations are conducted through seven television stations serving the Detroit, Houston, San Antonio, Orlando, Jacksonville and Roanoke television markets. All stations are network-affiliated (except for WJXT in Jacksonville), with revenues derived primarily from sales of advertising time. In addition, the stations generate revenue from retransmission consent agreements for the right to carry their signals.

Manufacturing. Manufacturing operations include Hoover, a Thomson, GA-based supplier of pressure impregnated kiln-dried lumber and plywood products for fire retardant and preservative application; Dekko, a Garrett, IN-based manufacturer of electrical workspace solutions, architectural lighting, and electrical components and assemblies; Joyce/Dayton Corp., a Dayton, OH-based manufacturer of screw jacks and other linear motion systems; and Forney, a global supplier of products and systems that control and monitor combustion processes in electric utility and industrial applications.

Healthcare. Graham Healthcare Group provides home health, hospice and palliative services. GHG also provides other healthcare services, including nursing care and prescription services for patients receiving in-home infusion treatments, ABA therapy clinics, physician services for allergy, asthma and immunology patients, in-home aesthetics and healthcare software-as-a-service technology.

Automotive. Automotive includes eight automotive dealerships in the Washington, D.C. metropolitan area and Richmond, VA, including Lexus of Rockville, Honda of Tysons Corner, Jeep of Bethesda, Ford of Manassas, which was acquired in December 2021, Toyota of Woodbridge and Chrysler-Dodge-Jeep-Ram of Woodbridge, which were acquired in July 2022, and Toyota of Richmond, which was acquired in September 2023. The automotive group was awarded a Kia Open Point dealership in Bethesda, MD, which commenced operations at the end of December 2023. For the years ended December 2023, 2022 and 2021, the automotive group recorded expense of $7.3 million, $5.7 million and $3.6 million, respectively, for operating and management services provided by Christopher J. Ourisman and his team of industry professionals.

Other Businesses. Other businesses includes the following:

•Leaf Group, a consumer internet company, which was acquired in June 2021. In the second quarter of 2023, the Company restructured Leaf into three stand-alone businesses:

◦Society6 (formerly included in Leaf Marketplace), an online art and design marketplace.

◦Saatchi Art (formerly included in Leaf Marketplace), an online art gallery.

◦WGB (formerly Leaf Media), which consists of a diverse portfolio of media properties that educate and inform consumers across a wide variety of life topics.

•Clyde’s Restaurant Group owns and operates 12 restaurants and entertainment venues in the Washington, D.C. metropolitan area.

•Framebridge, a custom framing service company.

•Code3, a marketing and insights company that manages digital advertising campaigns; the Slate Group and Foreign Policy Group, which publish online and print magazines and websites; and two investment stage businesses, Decile and City Cast. Other businesses also includes CyberVista, which merged with another entity in October 2022 resulting in the deconsolidation of the subsidiary and Pinna, which merged with another entity in June 2023 resulting in the deconsolidation of the subsidiary.

Corporate Office. Corporate office includes the expenses of the Company’s corporate office, defined benefit pension expense, and certain continuing obligations related to prior business dispositions.

Geographical Information. The Company’s non-U.S. revenues in 2023, 2022 and 2021 totaled approximately$930 million, $776 million and $709 million, respectively, primarily from Kaplan’s operations outside the U.S. Additionally, revenues in 2023, 2022 and 2021 totaled approximately$543 million, $448 million, and $404 million, respectively, from Kaplan’s operations in the U.K. The Company’s long-lived assets in non-U.S. countries (excluding goodwill and other intangible assets), totaled approximately $492 million and $477 million at December 31, 2023 and 2022, respectively.

Company information broken down by operating segment and education division:

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

The Company’s education division comprises the following operating segments:

Asset information for the Company’s education division is as follows:

20. SUMMARY OF QUARTERLY OPERATING RESULTS (UNAUDITED)

Quarterly results of operations for the year ended December 31, 2023, are as follows:

Quarterly results of operations for the year ended December 31, 2022, are as follows:

The sum of the four quarters may not necessarily be equal to the annual amounts reported in the Consolidated Statements of Operations due to rounding.

As disclosed in Note 2, in the fourth quarter of 2023, the Company identified misstatements in our previously issued Condensed Consolidated Balance Sheets which had a related impact to the changes in assets and liabilities within operating cash flows. The Company determined that these adjustments were not material to the previously issued financial statements, but have provided the impact on our previously issued Condensed Consolidated Statements of Cash Flows for each of the year-to-date interim periods in 2023 as shown below. These amounts will be revised in the respective 2024 10-Q filings.