Primedia’s 2nd-Quarter Doesn’t Measure Up


NEW YORK — Primedia Inc.’s second-quarter loss widened more than expected, hurt by charges, acquisition costs and a slump in business-to-business advertising.

Primedia, publisher of New York and Seventeen magazines, on Thursday reported a loss of $139.7 million, or 72 cents a basic share, compared with a loss of $7.1 million, or 13 cents a share, in the year-earlier period.

Both quarters included special items. The bottom-line loss in the latest period includes noncash charges of $10.1 million, a $10.3 million charge for severance and facility closures and a $27.6 million writedown on investments.

Excluding items, the company lost 49 cents a share, substantially deeper than the loss of 30 cents a share analysts surveyed by Thomson Financial/First Call expected.

In the year-earlier quarter, Primedia recorded a noncash charge of $9.8 million, a $10.4 million charge for severance costs and a $17.5 million gain. Excluding items, the loss came to 11 cents a share.

Revenue in the latest quarter rose 4.7% to $445.3 million from $425.5 million. Sales from continuing business rose 9.7% to $436.2 million, while sales from noncore operations dropped 67% to $9.1 million.

“We are very pleased with our revenue growth in this difficult environment,” Tom Rogers, chairman and chief executive officer of Primedia, said in a prepared statement.

“While we saw year-over-year revenue gains at 16 B2B publications, our overall B2B segment was hit by the well-publicized trade advertising malaise, particularly affecting the communications, entertainment, transportation and marketing sectors,” Mr. Rogers noted.

The company also incurred $16 million in depreciation expenses and $75.6 million in acquisition-related costs in the latest quarter, compared with expenses of $47.6 million last year. The increased costs stemmed primarily from Primedia’s acquisition of Web publisher About.com, completed in March.

Primedia said the $10.3 million charge for severance, closures and integration costs in the latest quarter resulted from layoffs at its corporate headquarters and its consumer and business-to-business units. Since the beginning of the year, the publisher has eliminated 360 positions.

Severance, closure and integration charges will total about $40 million to $50 million for the full year. The company incurred a total of $17 million in severance charges in the first half of the year.

The bulk of the provisions for the year are related to the $515 million acquisition of magazine group EMap USA, expected to close in September.

Earnings before interest, taxes, depreciation and amortization, or Ebitda, were $49.6 million in the latest quarter, including $58.7 million from ongoing businesses and a loss of $9.1 million from noncore businesses. This compares with Ebitda of $72.2 million last year, including $78 million from continuing businesses and a loss of $5.8 million from noncore businesses.

The acquisition of EMap is expected to add $8 million to $10 million of Ebitda in the fourth quarter and $62 million in 2002.

No amortization of goodwill will be taken for the EMap acquisition, as a result of accounting rule changes effective July 1, Primedia said.

For the year, Primedia reiterated it expects Ebitda from continuing businesses of $280 million to $300 million. Last year, Primedia’s Ebitda from continuing operations was $250.2 million.

For 2002, the company expects an Ebitda growth rate of 20%. However, it cautioned the growth rate could be as low as 15% if the economy continues to deteriorate. Given the weak advertising environment and the timing of divestitures, Primedia said it can’t provide further guidance for 2002.

Primedia, which publishes hundreds of special-interest magazines such as Craftrends and Arabian Horse World, as well as mainstream consumer titles, apartment and home guides and business directories, is majority-owned by New York investment firm Kohlberg Kravis Roberts&Co.

Copyright (c) 2001 Dow Jones & Company, Inc.