Graham Holdings Co [GHC] Filings

10-Q 1 ghc-20220630.htm FORM 10-Q ghc-20220630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q


☒			Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended June 30, 2022


☐			Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number 001-06714

GRAHAM HOLDINGS COMPANY


(Exact name of registrant as specified in its charter)

Delaware

53-0182885

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

1300 North 17th Street, Arlington, Virginia

22209

(Address of principal executive offices)

(Zip Code)

(703) 345-6300

(Registrant’s telephone number, including area code)

Securities Registered Pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class B Common Stock, par value $1.00 per share

GHC

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒. No ☐.

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒. No ☐.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

☒

Accelerated
filer

☐

Non-accelerated
filer

☐

Smaller reporting
company

☐

Emerging growth
company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐. No ☒.

Shares outstanding at July 29, 2022:

Class A Common Stock – 964,001 Shares

Class B Common Stock – 3,878,319 Shares

GRAHAM HOLDINGS COMPANY

Index to Form 10-Q


PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements

	Condensed Consolidated Statements of Operations	1

	Condensed Consolidated Statements of Comprehensive (Loss) Income	2

	Condensed Consolidated Balance Sheets	3

	Condensed Consolidated Statements of Cash Flows	4

	Condensed Consolidated Statements of Changes in Common Stockholders' Equity	5

	Notes to Condensed Consolidated Financial Statements	7

	Organization, Basis of Presentation and Recent Accounting Pronouncements	7
	Acquisitions and Dispositions of Businesses	7
	Investments	9
	Accounts Receivable, Accounts Payable and Accrued Liabilities	10
	Inventories, Contracts in Progress and Vehicle Floor Plan Payable	11

	Goodwill and Other Intangible Assets	11
	Debt	12
	Fair Value Measurements	14

	Revenue From Contracts With Customers	15
	Earnings Per Share	16
	Pension and Postretirement Plans	18
	Other Non-Operating Income	19
	Accumulated Other Comprehensive Income (Loss)	20
	Contingencies	21
	Business Segments	23

Item 2.	Management’s Discussion and Analysis of Results of Operations and Financial Condition	26

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	37

Item 4.	Controls and Procedures	37

PART II. OTHER INFORMATION



Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38

Item 6.	Exhibits	39

Signatures		40

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

GRAHAM HOLDINGS COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)


	Three Months Ended June 30				Six Months Ended June 30

(in thousands, except per share amounts)	2022		2021		2022		2021
Operating Revenues
Sales of services	$	563,113	$	511,037	$	1,120,682	$	994,706
Sales of goods	370,189		290,115		727,341		518,901
	933,302		801,152		1,848,023		1,513,607
Operating Costs and Expenses
Cost of services sold (exclusive of items shown below)	329,702		306,983		654,683		599,417
Cost of goods sold (exclusive of items shown below)	302,126		226,892		592,646		405,679
Selling, general and administrative	227,844		195,429		452,706		371,290
Depreciation of property, plant and equipment	19,413		16,600		38,888		33,145
Amortization of intangible assets	14,889		13,889		29,801		27,826
Impairment of long-lived assets	—		3,768		—		4,815
	893,974		763,561		1,768,724		1,442,172
Income from Operations	39,328		37,591		79,299		71,435
Equity in earnings of affiliates, net	1,427		1,776		4,031		15,204
Interest income	696		1,876		1,411		2,766
Interest expense	(15,973)		(7,353)		(27,390)		(15,801)
Non-operating pension and postretirement benefit income, net	50,871		25,216		101,376		54,003
(Loss) gain on marketable equity securities, net	(165,540)		83,698		(118,628)		162,912
Other income, net	1,176		16,122		4,052		22,442
(Loss) Income Before Income Taxes	(88,015)		158,926		44,151		312,961
(Benefit from) Provision for Income Taxes	(21,400)		43,000		14,200		84,400
Net (Loss) Income	(66,615)		115,926		29,951		228,561
Net Income Attributable to Noncontrolling Interests	(870)		(568)		(1,812)		(753)
Net (Loss) Income Attributable to Graham Holdings Company Common Stockholders	$	(67,485)	$	115,358	$	28,139	$	227,808

Per Share Information Attributable to Graham Holdings Company Common Stockholders
Basic net (loss) income per common share	$	(13.95)	$	23.07	$	5.76	$	45.55
Basic average number of common shares outstanding	4,842		4,968		4,857		4,968
Diluted net (loss) income per common share	$	(13.95)	$	22.99	$	5.74	$	45.43
Diluted average number of common shares outstanding	4,842		4,985		4,870		4,981

See accompanying Notes to Condensed Consolidated Financial Statements.

GRAHAM HOLDINGS COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (UNAUDITED)


	Three Months Ended June 30				Six Months Ended June 30
(in thousands)	2022		2021		2022		2021
Net (Loss) Income	$	(66,615)	$	115,926	$	29,951	$	228,561
Other Comprehensive (Loss) Income, Before Tax
Foreign currency translation adjustments:
Translation adjustments arising during the period	(40,928)		1,167		(42,666)		681


Pension and other postretirement plans:
Amortization of net prior service cost included in net income	716		792		1,432		1,584
Amortization of net actuarial gain included in net income	(18,082)		(924)		(35,856)		(3,353)

	(17,366)		(132)		(34,424)		(1,769)
Cash flow hedge gain	1,091		13		2,733		634
Other Comprehensive (Loss) Income, Before Tax	(57,203)		1,048		(74,357)		(454)
Income tax benefit related to items of other comprehensive (loss) income	4,224		32		8,243		331
Other Comprehensive (Loss) Income, Net of Tax	(52,979)		1,080		(66,114)		(123)
Comprehensive (Loss) Income	(119,594)		117,006		(36,163)		228,438
Comprehensive income attributable to noncontrolling interests	(870)		(568)		(1,812)		(753)
Total Comprehensive (Loss) Income Attributable to Graham Holdings Company	$	(120,464)	$	116,438	$	(37,975)	$	227,685

See accompanying Notes to Condensed Consolidated Financial Statements.

GRAHAM HOLDINGS COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS


	As of
(in thousands)	June 30, 2022		December 31, 2021
	(Unaudited)
Assets
Current Assets
Cash and cash equivalents	$	126,368	$	145,886
Restricted cash	18,849		12,175
Investments in marketable equity securities and other investments	662,831		824,445
Accounts receivable, net	475,333		607,471

Inventories and contracts in progress	178,280		141,471
Prepaid expenses	97,566		81,741
Income taxes receivable	39,789		32,744
Other current assets	2,411		1,241

Total Current Assets	1,601,427		1,847,174
Property, Plant and Equipment, Net	442,409		468,126
Lease Right-of-Use Assets	434,843		437,969
Investments in Affiliates	172,612		155,444
Goodwill, Net	1,617,648		1,649,582
Indefinite-Lived Intangible Assets	137,545		142,180
Amortized Intangible Assets, Net	216,612		247,120
Prepaid Pension Cost	2,364,135		2,306,514
Deferred Income Taxes	7,042		7,900
Deferred Charges and Other Assets (includes $646 and $782 of restricted cash)	167,032		163,516

Total Assets	$	7,161,305	$	7,425,525

Liabilities and Equity
Current Liabilities
Accounts payable and accrued liabilities	$	560,122	$	583,629
Deferred revenue	283,701		358,720
Income taxes payable	3,440		4,585


Current portion of lease liabilities	70,896		77,655
Current portion of long-term debt	94,578		141,749
Dividends declared	7,688		—


Total Current Liabilities	1,020,425		1,166,338

Accrued Compensation and Related Benefits	164,239		175,391
Other Liabilities	28,686		36,497
Deferred Income Taxes	670,512		676,706
Mandatorily Redeemable Noncontrolling Interest	25,149		13,661
Lease Liabilities	401,977		405,200
Long-Term Debt	511,574		525,752

Total Liabilities	2,822,562		2,999,545
Commitments and Contingencies (Note 14)

Redeemable Noncontrolling Interests	16,500		14,311
Preferred Stock	—		—
Common Stockholders’ Equity
Common stock	20,000		20,000
Capital in excess of par value	392,973		389,456
Retained earnings	7,131,747		7,126,761
Accumulated other comprehensive income, net of taxes
Cumulative foreign currency translation adjustment	(48,964)		(6,298)

Unrealized gain on pensions and other postretirement plans	953,605		979,157
Cash flow hedge	633		(1,471)
Cost of Class B common stock held in treasury	(4,141,303)		(4,108,022)
Total Common Stockholders’ Equity	4,308,691		4,399,583
Noncontrolling Interests	13,552		12,086
Total Equity	4,322,243		4,411,669
Total Liabilities and Equity	$	7,161,305	$	7,425,525

See accompanying Notes to Condensed Consolidated Financial Statements.

GRAHAM HOLDINGS COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


	Six Months Ended June 30
(in thousands)	2022		2021
Cash Flows from Operating Activities
Net Income	$	29,951	$	228,561
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and long-lived asset impairments	68,689		65,786
Amortization of lease right-of-use asset	33,473		36,774
Net pension benefit	(90,971)		(45,413)
Loss (gain) on marketable equity securities and cost method investments, net	118,628		(165,257)
Gain on disposition of businesses, property, plant and equipment and investments, net	(2,265)		(15,080)
Provision for doubtful trade receivables	2,218		2,506
Stock-based compensation expense, net of forfeitures	3,102		3,060
Foreign exchange loss (gain)	1,525		(680)
Equity in earnings of affiliates, net of distributions	2,036		(5,053)
Provision for deferred income taxes	5,795		52,856
Accretion expense and change in fair value of contingent consideration liabilities	(2,655)		(2,679)
Change in operating assets and liabilities:
Accounts receivable	126,006		38,541
Inventories	(36,360)		(4,971)
Accounts payable and accrued liabilities	(37,455)		(15,592)
Deferred revenue	(59,558)		(61,591)
Income taxes receivable/payable	(8,284)		10,681
Lease liabilities	(40,872)		(41,655)
Other assets and other liabilities, net	(15,834)		(9,343)
Other	2,239		1,394
Net Cash Provided by Operating Activities	99,408		72,845
Cash Flows from Investing Activities
Proceeds from sales of marketable equity securities	74,233		37,629
Purchases of property, plant and equipment	(32,154)		(27,502)
Purchases of marketable equity securities	(31,468)		(48,036)
Investments in equity affiliates, cost method and other investments	(27,950)		(4,910)
Investments in certain businesses, net of cash acquired	(3,053)		(272,428)
Net proceeds from disposition of businesses, property, plant and equipment, and investments	2,324		4,735




Return of investment in equity affiliates	152		4

Net Cash Used in Investing Activities	(17,916)		(310,508)
Cash Flows from Financing Activities
Net payments under revolving credit facilities	(47,000)		(2,304)
Common shares repurchased	(34,303)		—
Dividends paid	(15,465)		(15,106)
Net proceeds from (repayments of) vehicle floor plan payable	14,121		(9,591)
Repayments of borrowings	(7,580)		(2,071)
Proceeds from bank overdrafts	6,073		4,433
Deferred payments of acquisitions	(4,731)		(30,866)
Proceeds from exercise of stock options	1,437		—
Purchase of noncontrolling interest	—		(3,508)
Issuance of borrowings	—		121

Other	(2,123)		(283)
Net Cash Used in Financing Activities	(89,571)		(59,175)
Effect of Currency Exchange Rate Change	(4,901)		(684)
Net Decrease in Cash and Cash Equivalents and Restricted Cash	(12,980)		(297,522)
Beginning Cash and Cash Equivalents and Restricted Cash	158,843		423,054
Ending Cash and Cash Equivalents and Restricted Cash	$	145,863	$	125,532

See accompanying Notes to Condensed Consolidated Financial Statements.

GRAHAM HOLDINGS COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN COMMON STOCKHOLDERS’ EQUITY (UNAUDITED)


(in thousands)	Common Stock		Capital in Excess of Par Value		Retained Earnings		Accumulated Other Comprehensive Income		Treasury Stock		Noncontrolling Interest		Total Equity		Redeemable Noncontrolling Interest
As of December 31, 2021	$	20,000	$	389,456	$	7,126,761	$	971,388	$	(4,108,022)	$	12,086	$	4,411,669	$	14,311
Net income for the period					96,566								96,566
Net income attributable to noncontrolling interests					(986)						986		—

Net loss attributable to redeemable noncontrolling interests					44								44		(44)
Change in redemption value of redeemable noncontrolling interests											64		64		64
Distribution to noncontrolling interest											(357)		(357)
Dividends on common stock					(15,497)								(15,497)
Repurchase of Class B common stock									(9,527)				(9,527)
Issuance of Class B common stock									1,437				1,437
Amortization of unearned stock compensation and stock option expense			1,677										1,677
Other comprehensive loss, net of income taxes							(13,135)						(13,135)


As of March 31, 2022	$	20,000	$	391,133	$	7,206,888	$	958,253	$	(4,116,112)	$	12,779	$	4,472,941	$	14,331
Net loss for the period					(66,615)								(66,615)
Noncontrolling interest capital contribution											140		140
Acquisition of noncontrolling interest											512		512
Net income attributable to noncontrolling interests					(929)						929		—
Acquisition of redeemable noncontrolling interest													—		2,164
Net loss attributable to redeemable noncontrolling interests					59								59		(59)
Change in redemption value of redeemable noncontrolling interests											64		64		64
Distribution to noncontrolling interest											(872)		(872)
Dividends on common stock					(7,656)								(7,656)
Repurchase of Class B common stock									(24,776)				(24,776)
Forfeiture of restricted stock awards, net of Class B common stock issuances			(462)						(415)				(877)
Amortization of unearned stock compensation and stock option expense			2,302										2,302
Other comprehensive loss, net of income taxes							(52,979)						(52,979)
As of June 30, 2022	$	20,000	$	392,973	$	7,131,747	$	905,274	$	(4,141,303)	$	13,552	$	4,322,243	$	16,500






































(in thousands)	Common Stock		Capital in Excess of Par Value		Retained Earnings		Accumulated Other Comprehensive Income		Treasury Stock		Noncontrolling Interest		Total Equity		Redeemable Noncontrolling Interest
As of December 31, 2020	$	20,000	$	388,159	$	6,804,822	$	603,314	$	(4,056,993)	$	7,091	$	3,766,393	$	11,928
Net income for the period					112,635								112,635

Net income attributable to noncontrolling interests					(185)						185		—
Change in redemption value of redeemable noncontrolling interests			697								64		761		(634)

Distribution to noncontrolling interest											(126)		(126)
Dividends on common stock					(15,106)								(15,106)


Issuance of Class B common stock, net of restricted stock forfeitures			(5,188)						5,084				(104)
Amortization of unearned stock compensation and stock option expense			1,589										1,589
Other comprehensive loss, net of income taxes							(1,203)						(1,203)
Purchase of redeemable noncontrolling interest													—		(3,508)
As of March 31, 2021	$	20,000	$	385,257	$	6,902,166	$	602,111	$	(4,051,909)	$	7,214	$	3,864,839	$	7,786
Net income for the period					115,926								115,926
Net income attributable to noncontrolling interests					(699)						699		—
Net loss attributable to redeemable noncontrolling interests					131								131		(131)
Change in redemption value of redeemable noncontrolling interests											65		65		65
Distribution to noncontrolling interest											(152)		(152)
Dividends on common stock					(7,553)								(7,553)

Forfeiture of restricted stock awards, net of Class B common stock issuances			(47)						(49)				(96)
Amortization of unearned stock compensation and stock option expense			1,672										1,672
Other comprehensive income, net of income taxes							1,080						1,080
As of June 30, 2021	$	20,000	$	386,882	$	7,009,971	$	603,191	$	(4,051,958)	$	7,826	$	3,975,912	$	7,720

See accompanying Notes to Condensed Consolidated Financial Statements.

GRAHAM HOLDINGS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. ORGANIZATION, BASIS OF PRESENTATION AND RECENT ACCOUNTING PRONOUNCEMENTS

Graham Holdings Company (the Company), is a diversified education and media company. The Company’s Kaplan subsidiary provides a wide variety of educational services, both domestically and outside the United States (U.S.). The Company’s media operations comprise the ownership and operation of seven television broadcasting stations, several websites and print publications, podcast content and a marketing solutions provider. The Company’s other business operations include manufacturing, automotive dealerships, consumer internet brands, restaurants and entertainment venues, custom framing services and home health and hospice services.

Basis of Presentation – The accompanying condensed consolidated financial statements have been prepared in accordance with: (i) generally accepted accounting principles in the United States of America (GAAP) for interim financial information; (ii) the instructions to Form 10-Q; and (iii) the guidance of Rule 10-01 of Regulation S-X under the Securities and Exchange Act of 1934, as amended, for financial statements required to be filed with the Securities and Exchange Commission (SEC). They include the assets, liabilities, results of operations and cash flows of the Company, including its domestic and foreign subsidiaries that are more than 50% owned or otherwise controlled by the Company. As permitted under such rules, certain notes and other financial information normally required by GAAP have been condensed or omitted. Management believes the accompanying condensed consolidated financial statements reflect all normal and recurring adjustments necessary for a fair statement of the Company’s financial position, results of operations, and cash flows as of and for the periods presented herein. The Company’s results of operations for the three and six months ended June 30, 2022 and 2021 may not be indicative of the Company’s future results. These condensed consolidated financial statements are unaudited and should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

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

Use of Estimates in the Preparation of the Condensed Consolidated Financial Statements – The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and judgments that affect the amounts reported herein. 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.

The Company assessed certain accounting matters that generally require consideration of forecasted financial information, in context with the information reasonably available to the Company and the unknown future impacts of the novel coronavirus (COVID-19) pandemic as of June 30, 2022 and through the date of this filing. The accounting matters assessed included, but were not limited to, the Company’s carrying value of goodwill and other long-lived assets, allowance for doubtful accounts, inventory valuation and related reserves, fair value of financial assets, valuation allowances for tax assets and revenue recognition. These assessments had no impact on the Company’s condensed consolidated financial statements as of and for the six months ended June 30, 2022. The Company’s assessments as of and for the six months ended June 30, 2021 resulted in other long-lived asset impairment charges (see Note 8). The Company’s future assessment of the magnitude and duration of COVID-19, as well as other factors, could result in material impacts to the Company’s condensed consolidated financial statements in future reporting periods.

2. ACQUISITIONS AND DISPOSITIONS OF BUSINESSES

Acquisitions. On July 5, 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. 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 will be included in automotive.

In May 2022, Graham Healthcare Group (GHG) acquired two small businesses which are included in healthcare.

During 2021, the Company acquired six businesses: two in education, two in healthcare, one in automotive, and one 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 will be paid in the future. Leaf is a consumer internet company that builds creator-driven brands in lifestyle and home and art design categories. The acquisition is expected to provide benefits in the future by diversifying the Company’s business operations and providing operating synergies with other business units. The Company includes Leaf in other businesses.

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

In December 2021, GHG acquired two 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 $16.2 million in floor plan payables (see Note 5). 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 the first six months of 2021 were $1.4 million and were expensed as incurred. The aggregate purchase price of the 2021 acquisitions was allocated as follows on a preliminary basis, based on acquisition date fair values to the following assets and liabilities:


	Purchase Price Allocation
	Year Ended
(in thousands)	December 31, 2021
Accounts receivable	$	17,928
Inventory	25,383
Property, plant and equipment	13,126
Lease right-of-use assets	25,890
Goodwill	204,070
Indefinite-lived intangible assets	22,200
Amortized intangible assets	99,800
Other assets	4,911
Deferred income taxes	44,975
Floor plan payables	(16,198)
Other liabilities	(52,760)

Current and noncurrent lease liabilities	(25,593)
Redeemable noncontrolling interest	(6,616)

Aggregate purchase price, net of cash acquired	$	357,116

The 2021 fair values recorded were based upon preliminary valuations and the estimates and assumptions used in such valuations are subject to change within the measurement period (up to one year from the acquisition date). These values include measurement period adjustments related to accounts receivable, goodwill, amortized intangible assets, current and noncurrent lease liabilities, deferred income taxes and contingent consideration. The recording of deferred tax assets and liabilities, working capital and the amounts of residual goodwill are not yet finalized. Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the estimated future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. The goodwill recorded due to these acquisitions is attributable to the assembled workforces of the acquired companies and expected synergies. The Company expects to deduct $80.0 million of goodwill for income tax purposes for the acquisitions completed in 2021.

The acquired companies were consolidated into the Company’s financial statements starting on their respective acquisition dates. The following unaudited pro forma financial information presents the Company’s results as if the

current year acquisitions had occurred at the beginning of 2021. The unaudited pro forma information also includes the 2021 acquisitions as if they occurred at the beginning of 2020:


	Three Months Ended June 30				Six Months Ended June 30
(in thousands)	2022		2021		2022		2021
Operating revenues	$	934,076	$	903,405	$	1,851,383	$	1,728,945
Net (loss) income	(66,299)		113,875		31,152		225,206

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.

Other Transactions. 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.

3. INVESTMENTS

Money Market Investments. As of June 30, 2022, the Company had money market investments of $17.8 million that are classified as cash and cash equivalents in the Company’s Condensed Consolidated Balance Sheets. The Company had no money market investments as of December 31, 2021.

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


	As of
	June 30, 2022		December 31, 2021
(in thousands)
Total cost	$	269,576	$	273,201
Gross unrealized gains	382,007		537,915
Gross unrealized losses	(2,979)		(1,119)
Total Fair Value	$	648,604	$	809,997

At June 30, 2022 and December 31, 2021, the Company owned 55,430 and 44,430 shares in Markel Corporation (Markel) valued at $71.7 million and $54.8 million, respectively. The Co-Chief Executive Officer of Markel, Mr. Thomas S. Gayner, is a member of the Company’s Board of Directors. As of June 30, 2022, there was no marketable equity security holding that exceeded 5% of the Company’s total assets.

The Company purchased $31.5 million of marketable equity securities during the first six months of 2022. The Company purchased $48.0 million of marketable equity securities during the first six months of 2021.

During the first six months of 2022, the gross cumulative realized gains from the sales of marketable equity securities were $39.1 million. The total proceeds from such sales were $74.2 million. During the first six months of 2021, the gross cumulative realized gains from the sales of marketable equity securities were $27.7 million. The total proceeds from such sales were $37.6 million.

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


	Three Months Ended June 30				Six Months Ended June 30
(in thousands)	2022		2021		2022		2021
(Loss) gain on marketable equity securities, net	$	(165,540)	$	83,698	$	(118,628)	$	162,912
Less: Net losses (gains) in earnings from marketable equity securities sold and donated	4,838		(8,161)		10,605		(8,161)
Net unrealized (losses) gains in earnings from marketable equity securities still held at the end of the period	$	(160,702)	$