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PRIMEDIA Reports Third Quarter 2005 ResultsNEW YORK --(Business Wire)-- Nov. 8, 2005 -- PRIMEDIA Inc. (NYSE: PRM) today reported third quarter 2005 results. -0- *T ---------------------------------------------------------------------- ($ millions) Third Quarter First Nine Months ----------------- Percent ------------------- Percent 2005 2004 Change 2005 2004 Change ------- ------- ------- ------- ------- ------- Segment Revenue, net (a): Enthusiast Media (c) $177.7 $181.5 -2.1% $513.9 $521.8 -1.5% Consumer Guides 81.3 71.7 13.4% 236.4 214.2 10.4% Education 11.0 13.2 -16.7% 48.2 47.0 2.6% Intersegment Eliminations (0.1) (0.1) (0.2) (0.5) ------- ------- ------- ------- Total Net Revenue $269.9 $266.3 1.4% $798.3 $782.5 2.0% Segment EBITDA (b): Enthusiast Media $36.1 $40.0 -9.8% $101.3 $108.8 -6.9% Consumer Guides 17.8 19.8 -10.1% 53.9 59.9 -10.0% Education (2.7) (0.8) 2.3 1.3 76.9% Corporate Overhead (6.3) (7.5) (20.0) (22.2) ------- ------- ------- ------- Total Segment EBITDA $44.9 $51.5 -12.8% $137.5 $147.8 -7.0% Operating Income $30.6 $38.0 -19.5% $100.9 $100.1 0.8% Loss from Continuing Operations ($14.7) ($10.2) ($40.6) ($39.7) Discontinued (d) (d,e) Operations (c) $222.5 $18.9 $618.9 $61.7 Income Applicable to Common Shareholders $207.8 $6.2 $578.3 $8.5 Free Cash Flow (f) $21.1 $42.7 ($21.2) $7.9 ---------------------------------------------------------------------- a) This presentation eliminates all intrasegment activity. b) Reconciled to GAAP measure in the attached Financial Highlights table. c) In the third quarter of 2005, the Company decided to discontinue the operations of two magazines in the Enthusiast Media segment. Their operating results have been classified as discontinued for all periods presented. d) Includes net gain on sale of the Business Information Segment of $219.0 million e) Includes net gain on sales of About, Inc. of $379.1 million and PRIMEDIA Workplace Learning of $3.4 million. f) Free cash flow as used in this release is defined as net cash provided by operating activities adjusted for additions to property, equipment and other, net and capital lease obligations. Free cash flow is reconciled to a GAAP measure in the attached Exhibit A. *T Unless otherwise specified, all comparisons are to the same respective period in 2004. "PRIMEDIA's performance in the third quarter was primarily impacted by revenue declines in the Enthusiast Media Segment's automotive categories, as well as a reduction in U.S. Government advertising scheduled to air on Channel One. These declines were partially offset by growth in the Segment's non-automotive categories as well as strong revenue expansion in our Consumer Guides segment," said Dean Nelson, Chairman, President, and CEO of PRIMEDIA Inc. "While we are disappointed with the third quarter results, the management team is focused on resolving the performance issues affecting our Enthusiast Media categories through a combination of product improvement, expanded online presence and the development of more innovative marketing programs for our advertisers. At the same time, we will intensify our cost management to respond to the softness in some of our markets. We are confident we have the right team in place to generate the returns our shareholders expect from us," said Nelson. These results highlight the need to accelerate the implementation of PRIMEDIA's strategy rather than revisiting the strategy itself. Specifically, PRIMEDIA is committed to: -- Accelerating PRIMEDIA's online presence to help buyers and sellers execute transactions across all of our sectors. PRIMEDIA is currently underrepresented in the transactional market. PRIMEDIA will also create a tighter linkage between the Company's publications and its online sites. This will increase consumer interest in both the Company's publications and sites which will further enhance the value generated for PRIMEDIA's advertisers. -- Improving product quality, both print and online. Management has already begun the process of redesigning several of its key titles and has achieved positive results. The Company is now focused on accelerating the pace of redesigns and developing a faster, more comprehensive consumer feedback process that allows it to adjust more rapidly to changes in the endemic markets. -- Building innovative, high impact marketing programs that leverage PRIMEDIA's position as the targeted media category leader. The Company has initiated successful programs that extend PRIMEDIA print titles across non-traditional platforms such as online, wireless and events, and often has had success in creating synergies among of the Company's portfolio of products and brands. Automobile manufacturers and non-endemic brand advertisers have responded positively to these programs. At the same time, management is focused on managing costs, particularly when underlying markets are soft. This cost control effort is not inconsistent with PRIMEDIA's strategy, as it will concentrate on expenses that do not directly touch consumers and advertisers. In addition, each of the Company's strategic investments has specific milestones and the return on each of the Company's investments are tracked and managed. On October 24, 2005, the Company announced that its Board of Directors authorized management to explore the separation of its businesses via a tax-free spin-off into two separate publicly-traded companies as a means to unlock value for shareholders. The plan being contemplated would separate PRIMEDIA's Consumer Guides Segment from PRIMEDIA's Enthusiast Media and Education Segments. Under the plans currently being evaluated, the two entities would be independent and have separate management teams. The Company intends to announce further details regarding this possible separation later this year and has hired Goldman Sachs and Lehman Brothers, as advisers, and Simpson Thacher & Bartlett, as counsel. "We believe this potential transaction makes a great deal of sense. As PRIMEDIA's two primary business segments continue to execute their strategies, their investment profiles are increasingly differing. Our Enthusiast Media Segment has solid long-term growth prospects and generates significant cash flow while the Consumer Guides is a rapidly expanding and high growth Segment," said Nelson. "The management team has been assembled and with the advisers has begun evaluating alternatives and considering the effect of each alternative on the shareholders, debtholders, employees, customers, advertisers and vendors. Management expects to report its findings to the PRIMEDIA Board of Directors over the next few months. As the Board makes any determinations, the Company will make them public. We want to assure the various interested parties that no spin-off will occur unless both entities offer attractive investment profiles with a combination of positive growth, cash flow, financial stability and tax attributes." PRIMEDIA's consolidated third quarter Segment EBITDA decline of 12.8% is largely due to the drop in high-flow-through Enthusiast Media automotive revenue related to print ads and newsstand sales against which expenses could not be proportionately and concurrently reduced, combined with the Company's previously announced increases in expenses associated with higher paper prices and investments in its Consumer Guides segment. Operating income was $30.6 million in the third quarter, down 19.5%, compared to $38.0 million in the same period of 2004. The decrease was primarily due to lower Segment EBITDA. On September 30, 2005, the Company sold its Business Information segment, (excluding Ward's Automotive Group which has been transferred to the Enthusiast Media segment), for $385 million, resulting in a net gain of approximately $219.0 million. Income applicable to common shareholders was $207.8 million in the third quarter, including the gain on sale of the Business Information segment, compared to $6.2 million in the same period of 2004. Segment Results Enthusiast Media (Includes categories such as Consumer Automotive, Performance Automotive, International Automotive, Outdoors, Action Sports) -0- *T ---------------------------------------------------------------------- ($ millions) Third Quarter First Nine Months --------------- Percent ----------------- Percent 2005 2004 Change 2005 2004 Change ------- ------- ------- -------- -------- ------- Revenue, net (a) Advertising $93.5 $98.6 -5.2% $273.8 $279.3 -2.0% Circulation 62.1 65.5 -5.2% 183.0 192.8 -5.1% Other 22.0 17.3 27.2% 56.9 49.4 15.2% Intersegment Revenue 0.1 0.1 0.2 0.3 ------- ------- -------- -------- Total Net Revenue $177.7 $181.5 -2.1% $513.9 $521.8 -1.5% Segment Expenses $141.6 $141.5 0.1% $412.6 $413.0 -0.1% Segment EBITDA (b) $36.1 $40.0 -9.8% $101.3 $108.8 -6.9% ---------------------------------------------------------------------- a) This presentation eliminates all intrasegment activity. b) Reconciled to GAAP measure in the attached Financial Highlights table. *T The decline in Enthusiast Media revenue was largely the result of softness in the segment's Consumer Automotive advertising, Performance Automotive circulation (specifically newsstand), and advertising and circulation declines in the International Automotive category. Consumer Automotive: During the quarter, the Company experienced unexpected levels of advertising revenue decline in its Consumer Automotive category, which includes Motor Trend and Automobile. This category derives significant advertising from automotive manufacturers supporting their latest models. Based on PRIMEDIA's Order to Cash (OTC) billing system, Consumer Automotive, OEM advertising represented approximately 60% of the decline in print advertising revenue for the quarter and 38% for the year to date. While circulation revenue in this category has been stable, and non-print revenue is expected to reach double-digit growth for the year, print advertising revenue is expected to be down through the second half of 2005. The challenges for some of the major automotive manufacturers, particularly U.S. manufacturers, including changes in their advertising agencies, their product launch plans, and the extension of their employee discount pricing programs to the public, led to a large reduction in advertising dollars during the quarter. Print advertising revenue in this category, after growing high single digit in the second quarter, was down high single digit in the third quarter, and is forecast to be down again in the fourth quarter. Based on OTC, automotive print advertising revenue across all Enthusiast Media titles (both automotive and non-automotive) in the third quarter was down 9.9%, primarily attributable to the decline in spending by automotive manufacturers. Automotive manufacturer print advertising as a percentage of total Enthusiast Media print advertising revenue was 7.2% in the third quarter, compared to 9.9% in the second quarter and 8.3% in the comparable quarter last year. Performance Automotive: Enthusiast Media's Performance Automotive category consists of more than 40 titles including Hot Rod, Truckin, Motorcyclist, and Muscle Mustang. This category experienced low double digit declines in newsstand sales during the third quarter. Recent research by the company among auto enthusiasts--both subscribers and newsstand buyers--shows that underlying interest in and spending on auto aftermarket products is steady, as are subscription renewal rates, indicating a fundamentally solid market. Even with the weakness in the category's newsstand revenue, the category is expected to grow in 2005, led by increases in print advertising and double-digit growth in non-print revenue such as online, events, and licensing. International Automotive: The International Automotive category includes Super Street and Sport Compact Car. Consistent with previous guidance, advertising and circulation revenue in this category has declined and is expected to continue to decline through the full year, as the market suffers from the absence of any new 'tuner' platforms and a consolidation of aftermarket suppliers. The departure from the market of several competitors and continued focus on product upgrades should lead to stabilization in this category next year. Despite the declines in the segment's three automotive categories, all contribute significant, positive Segment EBITDA. On October 11, 2005, PRIMEDIA acquired Equine.com, the world's largest online marketplace for equine enthusiasts. The acquisition adds a fast-growing and profitable online marketplace to complement Enthusiast Media's existing portfolio of equine-based properties, and enables the Company to extend Equine.com's proprietary technology and unique marketing tools and know-how to its other industry categories such as marine and outdoor. The acquisition is consistent with the Company's goal of offering best-in-class mix of print and online media by providing enthusiasts with innovative applications to access content and carry out transactions across numerous categories. Other revenue, which is largely comprised of events, licensing, and merchandising, continued its significant growth as the Company leverages its brands in non-print areas. In the third quarter, PRIMEDIA Enthusiast Media added 33 retail chains, including Auto Zone, True Value, Fingerhut, Amazon.com, and KB Toys, selling our licensed products, bringing our total number of retail chains to 66, plus 800 independent retailers. Consumer Guides (Includes Apartment Guide, New Home Guide, and Auto Guide publications and their related websites, and the DistribuTech distribution business) -0- *T ---------------------------------------------------------------------- ($ millions) Third Quarter First Nine Months ------------- Percent ----------------- Percent 2005 2004 Change 2005 2004 Change ------ ------ ------- -------- -------- ------- Revenue, net (a) Advertising $67.0 $59.5 12.6% $194.7 $178.9 8.8% Other 14.3 12.2 17.2% 41.7 35.3 18.1% ------ ------ -------- -------- Total Net Revenue $81.3 $71.7 13.4% $236.4 $214.2 10.4% Segment Expenses $63.5 $51.9 22.4% $182.5 $154.3 18.3% Segment EBITDA (b) $17.8 $19.8 -10.1% $53.9 $59.9 -10.0% ---------------------------------------------------------------------- a) This presentation eliminates all intrasegment activity. b) Reconciled to GAAP measure in the attached Financial Highlights table. *T In the third quarter of 2005, PRIMEDIA's investment in Consumer Guides began to show strong returns as the Segment enjoyed double digit growth in both advertising and other revenues. This growth was driven by continued strong performance in New Home Guide, Auto Guide, and DistribuTech, PRIMEDIA's wholly-owned distribution arm. All of PRIMEDIA's Consumer Guides continue to benefit from the Company's market leading distribution business, DistribuTech. DistribuTech's dominance in high-value locations and added distribution drove high-teens growth in other revenue during the quarter. On October 18, PRIMEDIA's Consumer Guides Group named David Crawford President and Chief Operating Officer. He continues to oversee New Home Guides and DistribuTech, which have seen significant growth under his leadership. He now also oversees Apartment Guide, the Segment's largest division. Arlene Mayfield, previously vice president of New Home Guides with a proven track record there, will take over as President of Apartment Guide. Consumer Guides' newest division, Auto Guide, continued its strong growth and expansion across the nation in the third quarter with new editions in South Florida in August and Inland Empire, CA in September. These launches grew the division to thirteen editions in California, Florida, Georgia, New England and North Carolina with aggregate revenues showing month over month growth. Also in the 3rd quarter, Auto Guide complemented its growing national presence of successful print publications with the launch of a national web site www.Autoguide.com. Apartment Guide continues its market leadership in the most difficult market conditions in the business' thirty-year history. Apartment Guide remains stable despite unprecedented levels of condominium conversions that eliminate existing and potential customers from Apartment Guide markets. ApartmentGuide.com grew unique users 3.4% in the quarter, and continues to be the most recognized on-line brand in the apartment rental industry. New Home Guide, with 25 publications, is now the largest publisher of New Home advertising guides in the industry and is uniquely positioned to provide large home builders with national reach. New Home Guide grew revenue 18% from the prior quarter and 83% from the third quarter of 2004. Growth from existing publications contributed with 40% year over year growth. The division's national web site www.newhomeguide.com, also enjoyed strong growth providing a 49% increase in web leads to its customers in the quarter versus the prior year and is a leader in the online new homes market, with the largest network of new homes sites on the Internet. All of PRIMEDIA's Consumer Guides continue to benefit from the Company's market leading distribution business, DistribuTech. DistribuTech's dominance in high-value locations and added distribution drove high-teens growth in other revenue during the quarter. Consumer Guides Segment expenses were $63.5 million in the third quarter of 2005, up $11.6 million or 22.4% from the third quarter of 2004 primarily due to the significant investments made in new publications (New Home Guides and Auto Guides) and expanded distribution across the country as well as increased paper prices. Increased Segment expenses are consistent with the Company's 2005 guidance of an estimated $15 to $20 million of investments associated with new publication launches, distribution expansion and distribution renewals. Segment expenses also grew due to higher paper prices, the marginal costs associated with organic growth in the core businesses, and operating expenses from acquisitions completed in 2005. Education (Includes Channel One, Films Media Group and Interactive Medical Network) -0- *T ---------------------------------------------------------------------- ($ millions) Third Quarter First Nine Months ------------- Percent ----------------- Percent 2005 2004 Change 2005 2004 Change ------ ------ ------- -------- -------- ------- Revenue, net (a) Advertising $4.2 $6.8 -38.2% $23.7 $26.0 -8.8% Other 6.8 6.4 6.3% 24.5 20.8 17.8% Intersegment Revenue - - - 0.2 ------ ------ -------- -------- Total Net Revenue $11.0 $13.2 -16.7% $48.2 $47.0 2.6% Segment Expenses $13.7 $14.0 -2.1% $45.9 $45.7 0.4% Segment EBITDA (b) ($2.7) ($0.8) $2.3 $1.3 76.9% ---------------------------------------------------------------------- a) This presentation eliminates all intrasegment activity. b) Reconciled to GAAP measure in the attached Financial Highlights table. *T Channel One's results reflect certain U.S. Government agencies not renewing or reducing their advertising campaigns. Channel One's advertising revenue has traditionally been low in the third quarter since the network is not on the air during the summer. Government agency advertising spending was down 76% in the third quarter and 31% year to date. All other advertising revenue has increased 4% year to date. Judy Harris joined Channel One as CEO and President in April, 2005. Her primary objective is to broaden Channel One's revenue base beyond traditional advertising to include corporate and foundation sponsorships of public affairs topics that are relevant to teens. Growth in Other revenue reflects the turnarounds at Interactive Medical Network (IMN) and Films Media Group under the leadership of new management teams that were put in place in 2004. IMN has grown both revenue and Segment EBITDA every quarter in 2005. Films Media Group delivered its fifth consecutive quarter of revenue growth after thirteen quarters of declines, with revenue up 4.7%. Guidance As the company announced two weeks ago, it expects 2005 Segment EBITDA to decline in the high single to low double-digit percentage range versus 2004, and reiterates its 2005 guidance of low-to-mid single digit percentage revenue growth, but expects revenue growth will be at the lower end of this range. Guidance provided by PRIMEDIA remains in force unless revised by the Company, and does not include the impact of any future transactions that may occur. Depreciation, Amortization, and Interest Expense Depreciation expense was approximately $7.4 million in the third quarter versus $7.3 million in the same period of the prior year. Amortization expense was $2.7 million in third quarter, compared to $3.2 million in the prior year. Certain intangible assets became fully amortized over the past year resulting in the reduction in amortization expense. Interest expense was approximately $32.5 million in third quarter, compared to $32.3 million in 2004 as the Company's lower average debt levels were offset by higher interest rates. Discontinued Operations On September 30, 2005, the Company sold its Business Information segment, (excluding Ward's Automotive Group which has been transferred to the Enthusiast Media segment), for $385 million, resulting in a net gain of approximately $219.0 million. The operating results of the Business Information segment, excluding Ward's, have been classified as discontinued operations for all periods presented beginning in the second quarter of 2005. The operations of Ward's have been included in the Enthusiast Media segment. In the third quarter of 2005, the Company decided to discontinue the operations of two magazines in the Enthusiast Media segment. For the full year 2004, the magazines have revenue of approximately $6.0 million and a segment EBITDA loss of approximately $0.5 million. Beginning with third quarter 2005, the operations of these magazines have been classified as discontinued operations for all periods presented. Refinance of Bank Debt and Call of Preferred Stock and Notes for Redemption On September 30, 2005, the Company closed a new $500 million Term Loan B credit facility and called for redemption all of its outstanding shares of $8.625 Series H Preferred Stock (with an aggregate liquidation preference of approximately $212 million) and all of its outstanding 7 5/8% Senior Notes due 2008 in an aggregate principal amount of approximately $146 million. The redemption date for both the preferred stock and the senior notes was October 31, 2005. The proceeds of the Term Loan B facility, together with the proceeds from the sale of the Company's Business Information segment, excluding Ward's, are being used to repay bank debt and redeem the Series H Preferred Stock and the 7 5/8% Senior Notes. Commenting on the Company's increased financial strength, Matthew A. Flynn, Senior Vice President and Chief Financial Officer said, "The Company now has no preferred stock outstanding, and has reduced its net debt (debt and preferred) by nearly $1.3 billion since September 30, 2001, with a reduction in the Company's multiple of net debt to Segment EBITDA to below 7 from 12 over the same period. The Company's nearest significant maturity is not until 2010." Liquidity and Leverage The Company has more than adequate financial resources to meet its cash needs and service its debt and other fixed obligations for the foreseeable future. As of September 30, 2005, the Company had approximately $711 million in cash and unused credit lines, reflecting the receipt of payment for the sale of its Business Information segment, the proceeds of its new Term Loan B credit facility and decreasing its commitments in its Revolving Credit Facility from $355 million to $277 million. Pro forma for the redemption of the $8.625 Series H preferred stock and the 7 5/8% Senior Notes, the Company had approximately $345 million of cash and available unused credit lines at September 30, 2005. Free cash flow for the third quarter 2005 was $21.1 million compared to $42.7 million last year. The leverage ratio, as defined by the Company's credit agreements, for the 12 months ended September 30, 2005, is estimated to be approximately 5.0 times versus the permitted maximum of 6.25 times. Use of the Term Segment EBITDA The Company is organized into three business segments: Enthusiast Media, Consumer Guides, and Education. Enthusiast Media Segment EBITDA, Consumer Guides Segment EBITDA, and Education Segment EBITDA are reconciled to Net Income in the attached table. Segment EBITDA for a segment is defined as segment earnings before interest, taxes, depreciation, amortization and other credits (charges). Other credits (charges) include severance related to separated senior executives, non-cash compensation, provision for severance, closures and restructuring related costs, provision for unclaimed property and gain (loss) on sale of businesses and other, net. We believe that Segment EBITDA is the most accurate indicator of the Company's segment results because it focuses on revenue and operating costs driven by operating managers' performance. These segment results are used by the Company's chief operating decision maker, its Chairman, President, and CEO, to make decisions about resources to be allocated to the Segments and to assess their performance. Segment EBITDA is not intended to represent cash flows from operating activities and should not be considered as an alternative to net income as determined in conformity with accounting principles generally accepted in the United States of America. Segment EBITDA as presented may not be comparable to similarly titled measures reported by other companies since not all companies necessarily calculate Segment EBITDA in an identical manner, and therefore, is not necessarily an accurate measure of comparison between companies. Use of the Term Free Cash Flow Free Cash Flow is defined as net cash provided by operating activities adjusted for additions to property, equipment and other, net and capital lease obligations. The Company's chief operating decision maker, its Chairman, President, and CEO, uses free cash flow to make decisions based on the Company's cash resources. Free Cash Flow also is considered to be an indicator of the Company's liquidity, including its ability to reduce debt and shares subject to mandatory redemption and make strategic investments. Free Cash Flow is not intended to represent cash flows from operating activities as determined in conformity with accounting principles generally accepted in the United States of America. Free Cash Flow as presented may not be comparable to similarly titled measures reported by other companies since not all companies necessarily define Free Cash Flow in an identical manner, therefore, it is not necessarily an accurate measure of comparison between companies. Investor Conference Call PRIMEDIA's management will hold a conference call on November 8, 2005, 10:00 am, Eastern Time (GMT -5). To participate in the call, please dial (877) 236-1078 if you are in the U.S., or (213) 408-0663 if you are outside the U.S. The conference ID is PRIMEDIA. You should dial in at least five minutes prior to the start of the call. A recorded version will be available after the conference call at (888) 203-1112 in the U.S., or (719) 457-0820, if you are outside the U.S. The replay ID is 1185044. The recorded version will be available two hours after the completion of the call until 7:00 pm Eastern Time, November 15, 2005. Via Internet, the live and replay audio versions of the conference call will be available at www.primedia.com (you will not be able to ask questions via Internet). About PRIMEDIA PRIMEDIA is the leading targeted media company in the United States. With 2004 revenue of $1.1 billion, its properties comprise over 135 brands that connect buyers and sellers through print publications, websites, events, newsletters and video programs in three market segments: -- Enthusiast Media is the #1 special interest magazine publisher in the U.S. with more than 120 publications, 115 websites, 100 events, 10 TV programs, 340 branded products, and has such well-known brands as Motor Trend, Automobile, Creating Keepsakes, In-Fisherman, Power & Motoryacht, Hot Rod, Snowboarder, Stereophile and Surfer. -- Consumer Guides is the #1 publisher and distributor of free consumer guides in the U.S. with Apartment Guide, Auto Guide and New Home Guide, distributing free consumer publications through its proprietary distribution network, DistribuTech, in more than 49,000 locations. -- Education includes Channel One, a proprietary network to secondary schools; Films Media Group, a leading source of educational videos; and Interactive Medical Network, a continuing medical education business. This release contains forward-looking statements as that term is used under the Private Securities Litigation Act of 1995. These forward-looking statements are based on the current assumptions, expectations and projections of the Company's management about future events. Although the assumptions, expectations and projections reflected in these forward-looking statements represent management's best judgment at the time of this release, the Company can give no assurance that they will prove to be correct. Numerous factors, including those related to market conditions and those detailed from time-to-time in the Company's filings with the Securities and Exchange Commission, may cause results of the Company to differ materially from those anticipated in these forward-looking statements. Many of the factors that will determine the Company's future results are beyond the ability of the Company to control or predict. These forward-looking statements are subject to risks and uncertainties and, therefore, actual results may differ materially. The Company cautions you not to place undue reliance on these forward-looking statements. The Company undertakes no obligation to revise or update any forward-looking statements, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise. All references to "Company" and "PRIMEDIA" as used throughout this release refer to PRIMEDIA Inc. and its subsidiaries. -0- *T Financial Highlights Table and Exhibit A Follow PRIMEDIA Inc. Financial highlights (Unaudited) ($ in millions, except share and per share amounts) Three Months Ended September 30, -------------------------------------- 2005 2004 ---------------- --------------- Revenue, Net: Advertising $ 164.7 $ 164.9 Circulation 62.1 65.5 Other 43.1 35.9 ----------------- ---------------- Total Revenue, Net $ 269.9 $ 266.3 Cost of Goods Sold $ 63.5 $ 59.5 Marketing and Selling 51.0 52.4 Distribution, Circulation and Fulfillment 51.0 46.4 Editorial 21.5 20.0 Other General Expenses 31.7 29.0 Corporate Administrative Expenses 6.3 7.5 ----------------- ---------------- Total Segment Expenses $ 225.0 $ 214.8 Segment Earnings before Interest, Taxes, Depreciation, Amortization and Other Credits (Charges) (A) (Segment EBITDA): Enthusiast Media $ 36.1 $ 40.0 Consumer Guides 17.8 19.8 Education (2.7) (0.8) Corporate Overhead (6.3) (7.5) ----------------- ---------------- Total Segment EBITDA $ 44.9 $ 51.5 Depreciation of Property and Equipment (7.4) (7.3) Amortization of Intangible Assets and Other (2.7) (3.2) Severance Related to Separated Senior Executives - - Non-Cash Compensation (4.0) (1.3) Provision for Severance, Closures and Restructuring Related Costs (0.2) (2.0) Provision for Unclaimed Property - - Gain on Sale of Businesses and Other, Net - 0.3 ----------------- ---------------- Operating Income 30.6 38.0 Provision for Impairment of Investments - - Interest Expense (32.5) (32.3) Interest on Shares Subject to Mandatory Redemption (4.6) (11.0) Amortization of Deferred Financing Costs (1.0) (1.3) Other Income (Expense), Net (B) (2.9) 0.7 ----------------- ---------------- Loss Before Provision for Income Taxes (10.4) (5.9) Provision for Income Taxes (4.3) (4.3) ----------------- ---------------- Loss from Continuing Operations ($0.06 and $0.05 per basic and (14.7) (10.2) diluted share for the three months ended September 30, 2005 and 2004, respectively, and $0.15 and $0.21 per basic and diluted share for the nine months ended September 30, 2005 and 2004, respectively) Discontinued Operations ($0.85 and $0.07 per basic and diluted share for the three months ended September 30, 2005 and 2004, respectively, and $2.35 and $0.24 for the nine months ended September 30, 2005 and 2004, respectively, including gain on sale of businesses of $219.0 and $1.0 for the three months ended September 30, 2005 and 2004, respectively, and $601.5 and $43.3 for the nine months ended September 30, 2005 and 2004, respectively) 222.5 18.9 ----------------- --------------- Net Income 207.8 8.7 Preferred Stock Dividends - (2.5) ----------------- ---------------- Income Applicable to Common Shareholders $ 207.8 $ 6.2 ================= ================ Basic and Diluted Income Applicable to Common Shareholders per Common Share $ 0.79 $ 0.02 ================= ================ Basic and Diluted Common Shares Outstanding (weighted average) 263,122,384 260,446,328 ================= ================ Capital Expenditures, net $ 8.2 $ 10.0 ================= ================ At September 30, At December 31, 2005 2004 ---------------- --------------- Cash and cash equivalents $ 454.7 (C) $ 13.0 ================= ================ Long-term debt, including current maturities (D) $ 1,597.6 $ 1,660.9 ================= ================ Shares subject to mandatory redemption (D) $ 211.7 $ 474.6 ================= ================ Common shares outstanding 263,140,198 262,450,693 ================= ================ Nine Months Ended September 30, --------------------------------- 2005 2004 ---------------- ------------- Revenue, Net: Advertising $ 492.2 $ 484.3 Circulation 183.0 192.8 Other 123.1 105.4 ----------------- -------------- Total Revenue, Net $ 798.3 $ 782.5 Cost of Goods Sold $ 176.8 $ 169.1 Marketing and Selling 153.5 151.0 Distribution, Circulation and Fulfillment 150.8 142.9 Editorial 62.3 58.0 Other General Expenses 97.4 91.5 Corporate Administrative Expenses 20.0 22.2 ----------------- -------------- Total Segment Expenses $ 660.8 $ 634.7 Segment Earnings before Interest, Taxes, Depreciation, Amortization and Other Credits (Charges) (A) (Segment EBITDA): Enthusiast Media $ 101.3 $ 108.8 Consumer Guides 53.9 59.9 Education 2.3 1.3 Corporate Overhead (20.0) (22.2) ----------------- -------------- Total Segment EBITDA $ 137.5 $ 147.8 Depreciation of Property and Equipment (21.2) (21.0) Amortization of Intangible Assets and Other (7.4) (10.0) Severance Related to Separated Senior Executives - (0.7) Non-Cash Compensation (6.5) (4.8) Provision for Severance, Closures and Restructuring Related Costs (1.5) (7.6) Provision for Unclaimed Property - (3.9) Gain on Sale of Businesses and Other, Net - 0.3 ----------------- -------------- Operating Income 100.9 100.1 Provision for Impairment of Investments - (0.8) Interest Expense (98.5) (90.4) Interest on Shares Subject to Mandatory Redemption (21.9) (32.8) Amortization of Deferred Financing Costs (3.6) (3.7) Other Income (Expense), Net (B) (7.0) 0.8 ----------------- -------------- Loss Before Provision for Income Taxes (30.1) (26.8) Provision for Income Taxes (10.5) (12.9) ----------------- -------------- Loss from Continuing Operations ($0.06 and $0.05 per basic and (40.6) (39.7) diluted share for the three months ended September 30, 2005 and 2004, respectively, and $0.15 and $0.21 per basic and diluted share for the nine months ended September 30, 2005 and 2004, respectively) Discontinued Operations ($0.85 and $0.07 per basic and diluted share for the three months ended September 30, 2005 and 2004, respectively, and $2.35 and $0.24 for the nine months ended September 30, 2005 and 2004, respectively, including gain on sale of businesses of $219.0 and $1.0 for the three months ended September 30, 2005 and 2004, respectively, and $601.5 and $43.3 for the nine months ended September 30, 2005 and 2004, respectively) 618.9 61.7 ----------------- ------------- Net Income 578.3 22.0 Preferred Stock Dividends - (13.5) ----------------- -------------- Income Applicable to Common Shareholders $ 578.3 $ 8.5 ================= ============== Basic and Diluted Income Applicable to Common Shareholders per Common Share $ 2.20 $ 0.03 ================= ============== Basic and Diluted Common Shares Outstanding (weighted average) 262,919,067 260,232,692 ================= ============== Capital Expenditures, net $ 21.7 $ 23.5 ================= ============== At September 30, 2004 ---------------- Cash and cash equivalents $ 20.0 ================= Long-term debt, including current maturities (D) $ 1,680.8 ================= Shares subject to mandatory redemption (D) $ 474.6 ================= Common shares outstanding 260,636,464 ================= (A) Other credits (charges) include severance related to separated senior executives, non-cash compensation, provision for severance, closures and restructuring related costs, provision for unclaimed property and gain (loss) on sale of businesses and other, net. (B) The nine months ended September 30, 2005 includes expense of $6.3 million which represents the write- offs of unamortized deferred financing costs and the premiums paid on the Company's call for redemption for all of the outstanding shares of its $10.00 Series D Preferred Stock and its $9.20 Series F Preferred Stock, and for $80 million of its 7 5/8% Senior Notes due 2008. The three and nine months ended September 30, 2005 include expense of $3.2 million which represents the write-off of unamortized deferred financing costs associated with the Company's refinancing of certain of its bank debt. (C) Includes the temporarily invested remaining net cash proceeds from the Company's refinancing of certain of its bank debt and the net cash proceeds from the sale of the Business Information segment. (D) On May 11, 2005, the Company redeemed all of its outstanding shares of $10.00 Series D Preferred Stock (with an aggregate liquidation preference of approximately $168 million), all of its outstanding shares of $9.20 Series F Preferred Stock (with an aggregate liquidation preference of approximately $95 million) and $80 million aggregate principal amount of its 7 5/8% Senior Notes due 2008. In connection with the redemption of the Series D and Series F Preferred Stock, the Company obtained the written consent of its bank lenders and has repaid its outstanding Term Loans A and Term Loans B in aggregate principal amounts of $5 million and $35 million, respectively, and permanently reduced its total revolving loan commitments in an aggregate amount of $30 million. Note: Certain reclassifications have been made to prior year's data to conform with the current year presentation. Exhibit A PRIMEDIA Inc. Reconciliation of Free Cash Flow to Cash Provided by Operating Activities (Unaudited) ($ in millions) Three Months Ended Nine Months Ended September 30, September 30, 2005 2004 2005 2004 ---------- ----------- ----------- ----------- Net cash provided by operating activities $ 30.7 $ 53.3 $ 4.6 $ 36.3 Additions to property, equipment and other, net (8.2) (10.0) (21.7) (23.5) Capital lease obligations (1.4) (0.6) (4.1) (4.9) ---------- ----------- ----------- ----------- Free Cash Flow $ 21.1 $ 42.7 $ (21.2) $ 7.9 ---------- ----------- ----------- ----------- Supplemental information: Cash interest paid, including interest on capital and restructured leases $ 14.3 $ 10.5 $ 83.0 $ 69.3 ========== =========== =========== =========== Cash interest paid on shares subject to mandatory redemption $ 2.8 $ 6.3 $ 26.5 $ 32.8 ========== =========== =========== =========== Cash taxes paid, net of refunds received $ 4.1 $ 0.1 $ 4.3 $ 0.2 ========== =========== =========== =========== Cash paid for severance, closures and restructuring related costs $ 1.9 $ 3.9 $ 7.9 $ 11.7 ========== =========== =========== =========== *T |
