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Primedia Loses $278 Million in Third Quarter

Company plans to slash unprofitable businesses By Dave Nagel
Primedia Inc. has reported a net loss for the third quarter of $277.9 million. Primedia publishes a multitude of national consumer, enthusiast and trade publications and owns several Web-based properties, including The company's massive loss comes on sales from continuing businesses of $407.5 million for the quarter ended Sept. 30, which was actually an increase of 7 percent. The company says it has initiated cutbacks at all levels of the company, restructured its trade and Web businesses and instituted strict controls on all expenses. Without getting into specifics, Primedia reported it will slash businesses that fail to turn a profit in the coming few months.

The company, in its quarterly report, mainly talked about EBITDA (earnings before interest, taxes, depreciation and amortization), citing an EBITDA of $34.5 million for the quarter, which is about what the company expected. However, the company's interest expense alone ($39.5 million) more than wiped out its EBITDA. The actual loss for the quarter, at $277.9 million, compares with a loss in the same quarter last year of $43 million. The loss for the last nine months was $503.4 million.

Primedia's publications cover a wide variety of markets. The company says its traditional media business actually saw a 4 percent increase in sales for the quarter at $386.7 million, led by its consumer guides and enthusiast publications. Primedia's enthusiast publications include highly respected journals like Military History Quarterly. The company also publishes trade magazines in the digital media market, such as Mix and Millimeter, and consumer titles like Tiger Beat<, Seventeen and Teen Beat. Circulation revenues were up 7 percent, while brand advertising was down.

Sales in the enthusiast segment reached $315.7 million (including $18.2 million from "new media" sales). Sales for trade magazines came in at $104.4 million, down from 3Q 200 sales of $120.2 million.

Primedia says the fourth quarter is a traditionally strong one for them. However, in a prepared statement, the company reported: "While the soft advertising market will cause fourth quarter 2001 results to be below last year, it is expected to be much stronger than third quarter 2001. Cost actions already taken will show benefits in the fourth quarter. Fourth quarter 2001 is expected to be working capital positive. At the end of September 2001 the company had approximately $100 million of available and undrawn bank credit and expects to have in excess of that by year end 2001."

Primedia says it continues to shut down, sell off and integrate unprofitable businesses outside of its core focus. However, these businesses contributed only $6.9 million in loss for the quarter, or about 2.5 percent of the total loss.

Looking to the future, Primedia says the market remains uncertain. "Since the advertising decline immediately following September 11, 2001, the company has not seen any significant additional deterioration, but the market continues to be uncertain. When management sees reasonable clarity in the outlook for the fourth quarter 2001 and full year 2002, it will share that information with the public."

Dave Nagel is the producer of Creative Mac and Digital Media Designer; host of several World Wide User Groups, including Synthetik Studio Artist, Adobe Photoshop, Adobe InDesign, Adobe LiveMotion, Creative Mac and Digital Media Designer; and executive producer of the Digital Media Net family of publications. You can reach him at [email protected].

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